Products & Their RisksQuestion 137 of 398
A negotiable (jumbo) certificate of deposit differs from an ordinary bank CD mainly because it:
a.Is always fully insured regardless of size
b.Can be traded in the secondary market before maturity
c.Pays no interest until maturity
d.Is issued only by the federal government
Explanation
A negotiable CD is a large-denomination time deposit (typically $100,000 or more) that can be bought and sold in the secondary market, giving the holder liquidity before maturity. Ordinary retail CDs are non-negotiable and usually charge a penalty for early withdrawal. Amounts above the FDIC limit are not insured, so a negotiable CD carries some credit risk of the issuing bank.
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