FAQs
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Stock Market Driven CD
What are the advantages of the Stock Market Driven CD?
The principal is guaranteed and FDIC Insured up to $100,000 for a taxable account and $250,000 for IRAs. Therefore, there is the potential of higher rate of return on the principal deposit without sacrificing safety. With a minimum opening deposit of $1,000, this can be an affordable investment option and an opportunity to diversify your investment exposure across a broad base of individual companies. Is there an APY stated for the Stock Market Driven CD?
An APY is not quoted on Stock Market Driven CD’s because interest is determined at maturity. What is the Participation Rate?
The Participation Rate is the percent applied to the overall performance of the DJIA index used in determining the interest calculation. For the 5 Year Stock Market Driven CD, the participation rate is 85%. For the 3 Year Stock Market Driven CD, the participation rate is 75%. When is interest paid?
Interest is paid upon maturity. Is interest capped?
No, there is no cap or maximum return. Are there call features?
FAQs
Have a question we didn’t address? Click here to ask.
Stock Market Driven CD
What are the advantages of the Stock Market Driven CD?
The principal is guaranteed and FDIC Insured up to $100,000 for a taxable account and $250,000 for IRAs. Therefore, there is the potential of higher rate of return on the principal deposit without sacrificing safety. With a minimum opening deposit of $1,000, this can be an affordable investment option and an opportunity to diversify your investment exposure across a broad base of individual companies.
Is there an APY stated for the Stock Market Driven CD?
An APY is not quoted on Stock Market Driven CD’s because interest is determined at maturity.
What is the Participation Rate?
The Participation Rate is the percent applied to the overall performance of the DJIA index used in determining the interest calculation. For the 5 Year Stock Market Driven CD, the participation rate is 85%. For the 3 Year Stock Market Driven CD, the participation rate is 75%.
When is interest paid?
Interest is paid upon maturity.
Is interest capped?
No, there is no cap or maximum return.
Are there call features?
No, there are no call features. What if the market goes down prior to the issued date?
That is good, you want to buy low and sell high, to maximize return. Are Stock Market Driven CDs liquid?
No. However, Stock Market Driven CD’s may be redeemed in the event of death of the primary account holder or on the first, second, third, or fourth anniversary of the Product Issue Date. Redemption values are subject to market conditions but in no event will any customer lose more than 20% of principal. How is the instrument going to be taxed?
Holders of the Stock Market Driven CD are subject to an annual income tax, unless the deposit is held in a tax deferred account. Explanation of the annual income tax is more fully explained in the Disclosure Statement and referred to as the Original Issue Discount. The actual rate applied is shown on your final confirmation sent within one week after the issue date.
Depositors are issued 1099-OID Reports annually based on the minimum Applicable Federal Rate requirements The OID Rate is known at issue and remains constant throughout the term. (Typically, this rate is between 3.0-4.0%.) At maturity, the actual interest earned is netted against interest already reported. A positive value is reported as ordinary income while a loss is reported as ordinary loss. We suggest Stock Market Driven CD holders consult with their tax advisor or IRS Publication 1212 for further details. What are the risks associated with Stock Market Driven CDs?
You risk missing out on the guaranteed return of a fixed-rate certificate of deposit, if the DJIA declines or the possibility that you could have earned a higher return in a riskier investment. Stock Market Driven CDs also possess market risk and liquidity risk. Lastly, if you elect early withdrawal prior to maturity, you may receive more or less than your original deposit. What are the fees associated with participating in this program?
None. 100% of your money goes to work immediately. When are the Stock Market Driven CDs issued?
Stock Market Driven CD’s are generally issued on the 15th of the month with orders being cut off at noon on the 14th. Am I a good candidate for a Stock Market Driven CD?
Stock Market Driven CDs are a logical option for buy and hold customers looking to participate in the appreciation of a market index. Stock Market Driven CD customers are conservative, but want to participate in the historically higher returns of the stock market while protecting principal. Stock Market Driven CDs are particularly suited for persons that can put money aside in a tax deferred account or are saving for a purchase 3 years into the future. Can Stock Market Driven CDs be added to?
Only up until the Issue Date. After the Issue Date, you would need to fill out a new Customer Order Form and be subject to terms of the Stock Market Driven CD of the current month’s product issue. What kind of documentation will I receive?
You will receive a copy of the Customer Order Form, Frequently Asked Questions, Bank Privacy Policy, a Disclosure Statement, and a Customer Confirmation within 5 business days after issue date. Will I own stock as part of the Certificate?
No. The DJIA is used to track the activity of the stock market but you don’t actually purchase stock when you purchase this certificate. Instead, your deposit stays right in the bank. If I want to void my transaction, what is the last day I can do this?
By 12:00 PM EST on the business day prior to the Issue Date.
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