Certificate of Deposit (CD)

An agreement with a bank that promises a fixed interest rate on funds deposited for a specified period of time. CDs typically earn compound interest, and are issued in denominations ranging from $100 to $100,000 with maturities ranging from a few weeks to several years. There may be a penalty if funds are withdrawn before maturity. The Federal Deposit Insurance Corporation (FDIC) insures each depositor up to $100,000.