What are large-denominated certificates of deposit that can be traded on the secondary market often referred to as?

What are large-denominated certificates of deposit that can be traded on the secondary market often referred to as?

• A. Restricted CDs
• B. Negociable CDs
• C. Short-term CDs
• D. Long-term CDs

Answer: (B)

Large-denominated certificates of deposit that can be traded on the secondary market are referred to as negotiable CDs. These financial instruments typically have denominations of $100,000 or more and are issued by banks. The key characteristic of negotiable CDs is that they can be transferred or sold in the secondary market, which provides liquidity to the holder. This ability to sell them before maturity distinguishes them from traditional certificates of deposit, which are generally non-negotiable and must be held until they mature to avoid penalties. Referring to why other options do not apply: restricted CDs would imply limitations on trading or transferability, which does not describe the liquidity of negotiable CDs. Short-term and long-term CDs categorize these products based on their maturity duration, but do not address the tradability on the secondary market, which is essential for defining negotiable CDs.

Large-denominated certificates of deposit that can be traded on the secondary market are referred to as negotiable CDs. These financial instruments typically have denominations of $100,000 or more and are issued by banks. The key characteristic of negotiable CDs is that they can be transferred or sold in the secondary market, which provides liquidity to the holder. This ability to sell them before maturity distinguishes them from traditional certificates of deposit, which are generally non-negotiable and must be held until they mature to avoid penalties.

Referring to why other options do not apply: restricted CDs would imply limitations on trading or transferability, which does not describe the liquidity of negotiable CDs. Short-term and long-term CDs categorize these products based on their maturity duration, but do not address the tradability on the secondary market, which is essential for defining negotiable CDs.