Certificate of deposits

A certificate of deposit, or CD for short, is a type of time deposit that you can deposit your money into at a bank or other financial institution. The money you deposit is for a set period of time, at a fixed interest rate, and is guaranteed to pay you back the principal plus interest as long as you allow it to reach its maturity date. Certificates of deposit come in a range of deposit amounts so you may be able to deposit as little as $50 or $100 or hundreds of thousands of dollars. While certificates of deposit can be customized to fit your needs, there are also some general characteristics that all of them share.

Low Risk A certificate of deposit is considered to be a very low-risk investment option for investing your money. One of the reasons it is a low-risk investment is that you know what the return on your investment is upfront. You also know precisely when you get your money back and the money you made, which is the maturity date of the CD. Finally, certificates of deposit are a low-risk investment because each one is insured by the Federal Deposit Insurance Corp. (FDIC) for the value of the CD for up to $250,000. Pays Interest For the most part, certificates of deposit pay a fixed interest rate, which is a rate set prior to you depositing your money. Some certificates of deposit have options where the rate is variable or you can take advantage of a rate increase, but these are characteristics of special certificates of deposit, not traditional ones. In some cases, you can obtain a higher interest rate by depositing more money into the certificate of deposit when you buy it. The longer the maturity date is on the certificate of deposit, the higher interest rate you can earn as well. Autopilot Investing The majority of banks offer an automatic renewal on your certificate of deposit when it reaches maturity. This means that your money is automatically rolled into a new certificate of deposit on the day the original one matures. This ensures you do not lose the opportunity to make money on your money. Even when you have an automatic renewal option, however, you can stop the automatic renewal by contacting your bank prior to the maturity date. You also have a small reprieve when you first invest in a CD, which is typically seven days. If you deposit and withdraw your money within the seven-day period, you are charged a minimum penalty for early withdrawal.

Characteristics of a Certificate of Deposit

Commonly called CDs in short, they are similar to saving accounts, ensuring high yields and are risk free. In sum, they are "money in the bank" but they are different from savings accounts in that the CD has a specific, fixed term - often 6 months or one to five years - and usually at a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.

Interest and payment

In case of depositing the money for more than 1 Year, the interest is accrued yearly and the deposited amount will be paid together with the compounded interest at maturity. In case of depositing the money, less than 1 Year, the amount to be paid at maturity is calculated according to the following formula: (duration in days/365 days) *interest rate* deposited amount. For current interest rates please see bottom of page.

How to open a CD account in the bank:

The Customer can open an account exclusively for depositing the CD funds.

A.) For an existing Customer of the Bank: The Customer intending to open a CD account in Loyal Bank sends the signed Certificate Deposit Contract (CDC). Please click here to order this contract. After the approval of CD account opening document (the bank may contact you for further information), the Certificate Deposit Contract will be signed by the Bank also, and the Customer transfers the amount fixed in the contract to the opened CD account. B.) For a Customer not having a bank account in Loyal Bank: The customer intending to open a CD account in Loyal Bank must first open a bank account with Loyal bank. Please click here for account opening information. After opening an account with the Bank the Customer can open a CD account according to point A.)

Ownership of CD account: The CD account cannot be jointly owned, only a private individual or corporation can be the owner. Transaction limitations: The Client cannot make additional deposits to his CD account during a term. If the Client wants to deposit an additional amount, a new Certificate Deposit Contract should be signed and a new CD account shall be opened. Early withdrawal penalties: In case of early withdrawal the amount of penalty is 5% of the deposited amount. This means that in case of early withdrawal the original deposited amount without interest accrued and reduced by 5% is reimbursed to the Customer's account held at the Bank. Maturity: The Bank will send a notice of maturity to the client 30 days before the maturity date in which the Bank will ask the client to declare whether he/she wants to renew the Certificate Deposit Contract or wants the principal and interest to be credited to his/her account at the Bank. Please note that in case of CD accounts there is no automatic renewal.

Commercial paper
Types There are three types of commercial paper: 1. Finance paper - The largest issuers of commercial paper are banks and finance companies. o Banks often borrow money through the sale of short-term commercial paper and then lend the money at a higher interest rate over a longer term. o Finance companies often use the proceeds to help customers finance the purchase of products from the parent corporation. Examples of active issuers of commercial paper are General Electric Capital, General Motors Acceptance Corporation (GMAC), and Ford Motor Credit. The finance companies sell commercial paper and lend the money to customers who, in turn, buy new products like turbines and automobiles from the parent company. 2. Industrial paper - Industrial companies use commercial paper to finance working capital (accounts receivable and inventory) on both a permanent or seasonal basis, to fund operating expenses, and occasionally to finance, on a temporary basis, construction projects. 3. Asset-backed paper - In the past, commercial paper has typically been unsecured (i.e, has no collateral). This is rapidly changing and investors are increasing insisting that some of the company's assets be pledged as collateral, in case the company is unable to pay upon maturity of the commercial paper. Investors Money market mutual funds and commercial bank trust departments are the major investors in commercial paper. Placement Most firms use dealers (or intermediaries) to place their paper. These dealers purchase commercial paper from issuers and resell it to the public. Most dealers are subsidiaries of investment banks or commercial bank holding companies. (Paper sold in this manner is often called dealer paper.) Some issuers are large enough and active enough in the commercial paper market to employ their own sales force to distribute their paper. Most of these direct issuers are finance companies or bank holding companies. (Paper sold in this manner is often called direct paper.) Lack of Registration Generally, companies have to register the sale of securities with the Securities Exchange Commission (SEC) - a relatively expensive exercise. However, the SEC allows companies to avoid registration as long as the security means certain conditions, including:

1. the maturity of the security must be less than 270 days. For this reason, commercial paper will always be less than 270 days. (The average maturity is about 35 days.) Many issuers continuously roll over their commercial paper by selling more to replace those issues that are maturing. 2. the securities must be of a type not ordinarily purchased by the general public. Minimum denominations of commercial paper are usually $100,000, although face amounts as low as $10,000 are occasionally available. Typical face amounts are in multiples of $1 million. 3. proceeds from the security's sale must be used to finance "current transactions," which include the funding of operating expenses and the funding of current assets such as receivables and inventories. Money from the sale cannot be used to finance fixed assets on a permanent basis. Cost For high-quality issuers, the yield on commercial paper is generally cheaper than the interest rate on comparable bank loans. In fact, it is among the cheapest of all financial instruments. The rate on commercial paper is generally slightly above the rate that the U.S. government pays on Treasury bills. Sold at a Discount Although there are exceptions, commercial paper typically is sold at a discount to its face value, i.e., the investor buys the paper at less than face value and receives the face value upon maturity. (It is occasionally sold as an interest-bearing note.) Appearance Commercial paper trades are typically book-entry transactions, i.e., entries in a 3rd party's computer (e.g., a bank's computer) with no certificate that is bought and sold. If a paper certificate is used, the appearance of commercial paper may take many forms, often as simply as a post-dated check, as shown below.

Backup Financing Commercial paper issuers typically maintain a bank line of credit to back up its commercial paper. In fact, rating agencies require evidence of short-term liquidity and will not issue a commercial paper rating without it. These backup lines of credit are similar to insurance and may be used to retire maturing commercial paper in the event that the issuer is prevented from rolling over the paper, e.g. a default by another issuer scares investors from the commercial paper market and investors become scarce in the market.

Commercial paper has become one of America's most important debt markets, because of the advantages of commercial paper for both investors and issuers. Commercial paper outstanding grew at an annual rate of 14 percent from 1970 to 1991. Commercial paper totaled $528 billion at the end of 1991. This chapter describes some of the important features of the commercial paper market. The first section reviews the characteristics of commercial paper. The second section describes the major participants in the market, including the issuers, investors, and dealers. The third section discusses the risks faced by investors in the commercial paper market along with the mechanisms that are used to control these risks. The fourth section discusses some recent innovations, including asset-backed commercial paper, the use of swaps in commercial paper financing strategies, and the international commercial paper markets. Characteristics of Commercial Paper Securities offered to the public must be registered with the Securities and Exchange Commission according to the Securities Act of 1933. Registration requires extensive public disclosure, including issuing a prospectus on the offering. It is a timeconsuming and expensive process. Most commercial paper is issued under Section 3(a)(3) of the 1933 Act which exempts from registration requirements short-term securities as long as they have certain characteristics. The exemption requirements have been a factor shaping the characteristics of the commercial paper market. The following are requirements for exemption: - The maturity of commercial paper must be less than 270 days. In practice, most commercial paper has a maturity of between 5 and 45 days, with 30-35 days being the average maturity. Many issuers continuously roll over their commercial paper, financing a more-or-less constant amount of their assets using commercial paper. The nine-month maturity limit is not violated by the continuous rollover of notes, as long as the rollover is not automatic but is at the discretion of the issuer and the dealer. Many issuers will adjust the maturity of commercial paper to suit the requirements of an investor Notes must be of a type not ordinarily purchased by the general public. In practice, the denomination of commercial paper is large: minimum denominations are usually $100,000, although face amounts as low as $10,000 are available from some issuers. Typical face amounts are in multiples of $1 million, because most investors

are institutions. Issuers will usually sell an investor the specific amount of commercial paper needed. That proceeds from commercial paper issues be used to finance "current transactions," which include the funding of operating expenses and the funding of current assets such as receivables and inventories. Proceeds cannot be used to finance fixed assets, such as plant and equipment, on a permanent basis. The SEC has generally interpreted the current transaction requirement broadly, approving a variety of short-term uses for commercial paper proceeds as proceeds are not traced directly from issue to use. Firms are required to show only that they have a sufficient "current transaction" capacity to justify the size of the commercial paper program (for example, a particular level of receivables or inventory). Firms are allowed to finance construction as long as the commercial paper financing is temporary and to be paid off shortly after completion of construction with long-term funding through a bond issue, bank loan, or internally generated cash flow. Commercial paper is typically a discount security (like Treasury bills): the investor purchases notes at less than face value and receives the face value at maturity. The difference between the purchase price and the face value, called the discount, is the interest received on the investment. Commercial paper is, occasionally, issued as an interest-bearing note (by request of investors). The investor pays the face value and, at maturity, receives the face value and accrued interest. All commercial paper interest rates are quoted on a discount basis. Until the 1980s, most commercial paper was issued in physical form in which the obligation of the issuer to pay the face amount at maturity is recorded by printed certificates that are issued to the investor in exchange for funds. A safekeeping agent hired by the investor held the certificates, until presented for payment at maturity. The "settling" of the transaction, (the exchange of funds for commercial paper first at issuance and then at redemption, occur in one day. On the day the commercial paper is issued and sold, the investor receives and pays for the notes and the issuer receives the proceeds. On the day of maturity, the investor presents the notes and receives payment. Commercial banks, in their role as issuing, paying, and clearing agents, facilitate the settling of commercial paper by carrying out the exchanges between issuer, investor, and dealer required to transfer commercial paper for funds. An increasing amount of commercial paper is being issued in book-entry form whereby entries in computerized accounts are replacing the physical commercial paper certificates. Book-entry systems will eventually completely replace the physical printing and delivery of notes. The Depository Trust Company (DTC), a clearing cooperative operated by member banks, began plans in September 1990 to convert most commercial paper transactions to book-entry form. By May 1992, more than 40 percent of commercial paper was issued through the DTC in book-entry form. The advantages of a paperless system are significant. In the long run the fees and costs associated with the book-entry system will, be significantly less than under the physical delivery system. The expense of delivering and verifying certificates and the risks of messengers failing to deliver certificates on time will be eliminated. As all transactions between an issuing agent and a paying agent will be settled with a

single end-of-day wire transaction, the problem of daylight overdrafts, which arise from non-synchronous issuing and redeeming of commercial paper will be reduced.

Certificate of Deposits and Its Features

Certificate of deposits are those deposits which are issued by banks and it is like a promissory note. The term of a CD generally ranges from one month to five years. Following are the important features of certificate of deposits 1. Certificate of deposits is considered as risk-less because default risk in them is almost negligible and hence its safe bet for investors. 2. Certificate of deposits is highly liquid and marketable and hence investors can buy or sell it whenever they desire to do so. 3. They are transferable from one party to another which cannot be done with term deposits and hence it is an added advantage for investors who are willing to invest in it. 4. It is a time deposit that restricts holders from withdrawing funds on demand, however if an investor wants to withdraw the money, this action will often incur a penalty. 5. A certificate of deposits may be payable to the bearer or registered in the name of the investor. Most certificates of deposits are issued in bearer form because investors can resell bearer CDs more easily than registered CDs. Hence from the above one can see that certificate of deposits can be one of the alternatives for a investor if he or she does not want to invest in term deposits.

Commercial Paper and Its Features

Commercial paper can be defined as a short term, unsecured promissory notes which are issued at discount to face value by well known companies that are financially strong and enjoy a high credit rating. Here are some of the features of commercial paper 1. They are negotiable by endorsement and delivery and hence they are flexible as well as liquid instruments. Commercial paper can be issued with varying maturities as required by the issuing company. 2. They are unsecured instruments as they are not backed by any assets of the company which is issuing the commercial paper. 3. They can be sold either directly by the issuing company to the investors or else issuer can sell it to the dealer who in turn will sell it into the market.

4. It helps the highly rated company in the sense they can get cheaper funds from commercial paper rather than borrowing from the banks. However use of commercial paper is limited to only blue chip companies and from the point of view of investors though commercial paper provides higher returns for him they are unsecured and hence investor should invest in commercial paper according to his risk -return profile.

Certificate of deposit
Certificate of deposits(CD) are short term deposit instruments issued by banks and financial institutions to raise large sums of money. Features of Certificate Of Deposit

Document of title to time deposit. Unsecured negotiable promotes. Freely transferable by endorsement and delivery. Issued at discount to face value. Repayable on a fixed date without grace days. Subject to stamp duty like the usince promissory notes.

features of equity shares are

1.they don't have no preferential right in respect of payment of dividend or in the repayment of capital at the time of winding of the company. 2.equtiy shares are risk bearing shares because they are the actual owners of the company when ever company run into losses they have to bear the losses. 3.equity share holders enjoys voting right whenever there is a meeting they will enjoy their voting power, enjoys voting power in electing board of directors. 4.equity capital is the permanent capital for the company . The company need not to return capital . Company has to repay the capital only at the time of winding up. 5.equity shares are easily transfer from one person to another at the stock exchange according to the procedure laid down in the article of association of the company. 6.company gives the bonus shares to the equity shareholders at a free cost on account of reserves . undistributed profits and accumulated profit 7.equity shareholder are give first priority when ever company want to raised fresh capital