Certificate of Deposit (CD):
A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified interest rate and can be issued in any denomination. CDs are generally issued by commercial banks.
Technically, a certificate of deposit is a promissory note on which the maker is a bank. CDs under $100,000 are called "small CDs". CDs for more than $100,000 are called "large CDs" or "jumbo CDs". Almost all large CDs, as well as some small CDs, are negotiable.
The main advantage of CDs is their safety and knowing the return you'll receive. You'll generally earn more than in a savings account, and you won't be at the mercy of the stock market.
Commercial Paper (CP):
For many corporations, borrowing short-term money from banks is often a labored and annoying task. Their desire to avoid banks as much as possible has led to the widespread popularity of commercial paper.
Commercial paper is an unsecured, short-term loan issued by a corporation, typically for financing accounts receivable and inventories. It is usually issued at a discount, reflecting current market interest rates. Maturities on commercial paper are usually no longer than 9 months, with maturities of 1-2 months being the average.
Commercial paper is usually issued with denominations of $100,000 or more. Therefore, smaller investors can only invest in commercial paper indirectly through money market funds. Typically only companies with high credit ratings and credit worthiness issue commercial paper.
Floating-Rate Notes (FRN):
Floating-rate notes are debt securities with coupons that are reset periodically against a benchmark rate, such as the three-month.
Treasury bill or the three-month London Interbank Offer Rate (LIBOR). They offer the possibility of higher coupon payments. in a rising interest-rate environment.
Floating-rate notes are issued by corporations or agencies. They may have additional features, for example, maximum or minimum coupons, or may change to a fixed rate in the future.
Fixed Rate Bonds:
An investment that provides a return in the form of fixed periodic payments and eventual return of principle at maturity. Unlike a variable-income security where payments change based on some underlying measure, such as short-term interest rates, fixed-income securities payments are known in advance. Generally, these types of assets offer a lower return on investment because they guarantee income.
The above information is not a recommendation or investment advise and appears for information purposes only. While information given believed to be reliable, ARAB BANK guarantee its accuracy or completeness, and accept no responsibility whatsoever (including any loss suffered by any company or individuals) resulting from trading on its basis. No rights can be gained from this publication. There are risk involved in this product