Fixed-Term Investments

• Fixed-term describes interest-bearing investments with a discrete lifespan, or maturity period. Once a fixed-term investment has reached maturity, the holder receives the principal amount initially paid or deposited, as well as all remaining accrued interest. Fixed-term investments include such items as time deposits, certificates of deposit and Treasury bills.
  
  

Interest Accrual

• Based on the face (par) value of the security purchased or the amount of money deposited in a savings account (principal), interest accrues at a specific fixed rate for the term of the investment. Once the investment reaches maturity, the holder receives the accrued interest as one lump-sum along with the par value or principal amount. This money may be used as income or invested in another fixed-term item.
  
  

Time Deposits

• Time deposits are savings accounts which offer holders a fixed amount of interest over a specific number of months. Time deposits require a deposit in the hundreds or thousands of dollars. They offer higher interest than traditional savings accounts that is known in advance and guaranteed. Unlike traditional savings accounts, holders are restricted from making withdrawals until the maturity period has passed.
  
  

Certificates of Deposit

• Certificates of Deposit are similar to a time deposit, but contain a specific par value in the ten or even hundreds of thousands of dollars. The issuing bank sells CDs for a certain amount less than the actual par value. Once the maturity date has arrived, the holder receives the CD's full par value. The gap between the purchase price and par value represents the accrued interest. CDs generally have maturity periods of up to one year and require that the money not be withdrawn in the interim.
  
  

Treasury Bills

• Treasury bills are issued by the U.S. Treasury and denominated in the tens and hundreds of thousands of dollars. T-bills have fixed maturity periods between several days and one year and pay interest in a similar manner as CDs. The U.S. Treasury sells T-bills at a discount to their par value and then pay holders the entire par value at maturity. Though T-bills and CDs bear great resemblance to one another, T-bills are widely seen as safer, because they are backed by the U.S. Treasury.