res.mitmentsbecauseofitsabilitytoincreasetaxesortoissuecurrencyinfulfillmentofitsscheduledpayments.*Chapter6TheMoneyMarket*2)NegotiableCertificatesofDeposit(CDs)Acertificateofdeposit(CD)isadebtinstrumentsoldbyadepositoryinstitutionthatpaysannualinterestpaymentsequaltoafixedpercentageoftheoriginalpurchaseprice.Inaddition,atmaturitytheoriginalpurchasepriceisalsopaidback.MostCDshaveamaturityof1-12months.Becauseamaturitydateisspecified,aCDisatermsecurityasopposedtoademanddeposit:Termsecuritieshaveaspecifiedmaturitydate;demanddepositscanbewithdrawnatanytime.*Chapter6TheMoneyMarket*mercialpapersecuritiesareunsecuredpromissorynotes,issuedbycorporationsthatmatureinnomorethan270days.Becausethesesecuritiesareunsecured,mercialpaper.Theinterestrateofthecorporationischargedreflectsthefirm’sleverofrisk.
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