Dictionary of Banking Terms: market index cd
market index cd
Certificate of Deposit that pays a rate of interest tied to a commodity or a market index. Also known as an indexed deposit account or indexed CD. These CDs pay stock market-like returns but offer the safety of a CD protected by deposit insurance. Interest is calculated based on the return of the S&P equity index. This type of CD carries added protection for depositors; even in a bear market (falling stock prices) no principal can be lost. In a bull market (rising prices), the CD pays 100% of the investment return of the index.
