Question : What does a company gain by offering a consumer a CD account or a mutual fund?
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 ?
- asked by MIT slagsmal
All Answers:
Answer #1
The institution that issues a CD lends out themoney at higher rates than they pay on the CD. Mutual funds make money on fees they chargeinvestors in the fund.
- answered by jeff410
Answer #2
With a CD (certificate of deposit), financialinstitutions offer higher rates as you arecontracting to leave the funds with them for aspecific period of time. Deposits are a liabilityto banks, which they use to fund assets, or loans. Loans will have higher interest rates, and thebanks make their money on the rate spreads. Theylike to know the money will be there for longerperiods of time, therefore the higher interestrates. With savings accounts, you can draw thefunds on demand, so banks have a lesser liquidityposition with them, therefore they pay less.WithMutual Funds, you don't have interest rates thatare paid. You have a yield that you can earn,provided the value of the fund increases. However, these are subject to losses, as they candecrease in value.Do not confuse the two, they arevery different.
- answered by azfinfan
Answer #3
commissions and fund to invest.
- answered by d10
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