A certificate of deposit is a savings product offered by banks where you deposit a fixed sum for a predetermined period — typically 3 months to 5 years — and receive a contractually guaranteed interest rate in return. Unlike a regular savings account, you generally cannot withdraw early without penalty. In exchange for accepting this lock-up, you receive a higher and more predictable return than a flexible account.
CDs are issued directly by banks and are considered one of the safest investment vehicles available, since your principal is not subject to market risk. The return is calculated using simple interest: principal × rate × (days / 365).