EQUITY INDEX CD’S
Equity Index certificate of deposits allow you to ease into the market by reaping gains without enduring too much risk.
Equity Index CD’s have been around since the 1980’s. This investment instrument came at a time when the stock market crashed and served those investors looking for portfolio protections. Chase Manhattan Bank of New York was among the first to offer the structured product. Large domestic and regional investment banks, such as Citigroup and Bank of America, and smaller community and foreign banks also followed suit.
Bank deregulation over the years has made the CD’s more available and increased their popularity because of competition within the industry to attract more depositors. Banks have offered these securities and marketed them to compete against mutual funds and other equity investments. They have also been promoted as a means of protection during a financial downturn because the principal is secured by the government which is one of the few commonalities it shares with a traditional CD.A corporate bond is a bond issue by a corporation. It is a bond that a corporation issues to raise money effectively in order to expand its business. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date. (The term “commercial paper” is sometimes used for instruments with a shorter maturity.)
Sometimes, the term “corporate bonds” is used to include all bonds except those issued by governments in their own currencies. Strictly speaking, however, it only applies to those issued by corporations. The bonds of local authorities and supranational organizations do not fit in either category (call for further information).
Corporate bonds are often listed on major exchanges (bonds there are called “listed” bonds) and ECNs, and the coupon (i.e. interest payment) is usually taxable. Sometimes this coupon can be zero with a high redemption value. However, despite being listed on exchanges, the vast majority of trading volume in corporate bonds in most developed markets takes place in decentralized, dealer-based over-the-counter markets.
Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date. Other bonds, known as convertible bonds, allow investors to convert the bond into equity.