How to Value a Certificate of Deposit

Although a Certificate of Deposit (CD) is an federally-insured, generally short-term investment, many investors do not realize that the value of a CD can fluctuate. When you purchase a CD from a bank, the fluctuation in value can be represented as a penalty you pay for early redemption. With CDs issued by brokerage firms, outside market factors such as fluctuating interest rates can affect the price of a CD, as with any other investable security, such as a bond, that pays interest. While these fluctuations in value are generally small, they may play a significant role in your investment planning, particularly if you need to sell the CD before maturity.

Call your investment adviser or representative. Your financial services firm, particularly if it is a full-service firm, most likely has its own bond desk, where CDs and other interest-bearing securities are regularly traded. Generally, as an investor, you cannot contact a bond desk directly, so going through your financial adviser is your easiest way to get a live market price for your CD. Bear in mind that bond desks usually provide prices so that investors can make a transaction, rather than simply for informational purposes, so calling your adviser and/or the bond desk frequently just to get a market price is frowned upon.

Speak with your banker. If you purchased your CD from a bank, your banker will most likely tell you that the current value of your CD is the amount you paid for it. However, if you sell a CD before it matures, you will most likely face an early redemption penalty. Ask your banker exactly what this penalty will be and if it varies depending on when you redeem your CD. If you subtract the amount of the penalty from the amount that you paid for the CD, you can calculate a current value for your CD.

Check your account statement. Although it will not be a live market price, if you own a CD with a brokerage house, the price should be listed on your statement at least monthly. As CD prices do not fluctuate as much as other securities such as stocks, the price on your monthly statement can at least be a guide as to the approximate current market value of your CD. For CDs held at a bank, monthly statements often list the purchase price as the current value, and you will have to subtract the penalty for early withdrawal to determine a market value if you were to sell the CD the same day.