What does a company gain by offering a consumer a CD account or a mutual fund?
August 27th, 2010
These types of accounts (CDs and Mutual funds) are said to have higher interest rates that the account holder can benefit from than a normal savings account , but what’s in it for the company offering the CD or the Mutual fund ?
My Related Websites
- Boldest U.K. Interest Rate Prediction
- Learn How to Use Your Health Savings Account to Pay for Dental …
- Top 5 Technology Mutual Funds – Best of Funds | Stock Market News …
- History of US Interest Rates: 1790-Present | The Big Picture
- Demystifying interest rates (Part 2) | Jemstep Blog : Stock …
- S&P ETFs vs. S&P Mutual Funds « ETF Trends
- Get Reviews On Investment Management Service And Bank Accounts …
- $220 bonus – Bank of America : open a checking account, for …
- WIN A TRIP TO THE BIG APPLE – OFFICIAL RULES « WBBM Newsradio 780
- NASA's Robonaut-The Multifaceted Twitter Account Holder …
- Mortgage Interest Rate History, and a Change for the Future | RoFx.Net
- Wonk City: More on Deflation and Interest Rates « Modeled Behavior
- Lower Fees on Mutual Funds? Yes, If the SEC Has Its Way « Jane …
- How to buy mutual funds?
- How do mutual funds work, and how can i get one?
- how do i get started buying mutual funds?
- How safe of an investment are mutual funds?
- What do you think of mutual funds? Are they worth sticking it out for?
- Has anyone heard of Green-Lime Clothing Company or GREEN-LIME …
- Win the Legendary Sweatpants of Immortality! | The Official …
Mail this post
Posted in 
Tags: 
commissions and fund to invest.
With a CD (certificate of deposit), financial institutions offer higher rates as you are contracting to leave the funds with them for a specific period of time. Deposits are a liability to banks, which they use to fund assets, or loans. Loans will have higher interest rates, and the banks make their money on the rate spreads. They like to know the money will be there for longer periods of time, therefore the higher interest rates.
With savings accounts, you can draw the funds on demand, so banks have a lesser liquidity position with them, therefore they pay less.
With Mutual Funds, you don’t have interest rates that are paid. You have a yield that you can earn, provided the value of the fund increases. However, these are subject to losses, as they can decrease in value.
Do not confuse the two, they are very different.
The institution that issues a CD lends out the money at higher rates than they pay on the CD. Mutual funds make money on fees they charge investors in the fund.