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|Subject: Re: Ameritrade CDs||Date: 7/22/2013 3:39 PM|
|Author: aj485||Number: 35040 of 35930|
The quotes that I got payed me the face value of the CDs plus 1/3 of the total interest I would have collected if I held to maturity.
I assume your CDs were at rates above the currently available rates for 3 year CDs?
Like I said, these CDs were 3 years from their call date, so I actually got paid 1 year of interest for selling them. I jumped at the offer.
And when Fidelity sold the CDs to someone else, they probably sold them at a price above face value so that the buyer would get only about 1 to 1 1/2 years of the interest you would have received had you held until maturity, making money on the spread, in addition to any commissions.
For those who have CDs and want to get their principal back prior to maturity, selling them to a broker can be a more profitable way to get out, rather than breaking the CD and possibly having to pay a penalty, if the interest rate on the CD is above current rates. If the rates are comparable to current rates, or lower, the seller would need to calculate the numbers both ways to see if it would be cheaper for them to break the CD or sell it.
For those buying CDs in the secondary market, they need to be aware of the issues of purchasing above par, potential call dates, and the status of FDIC insurance on the CD.
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