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My 6.25% CD finally matures in two weeks and I have to figure out what I want to do with the proceeds. Penfed's current CDs appear to be the highest around: 3 years - 2%, 4 years - 2.22%, and 5 years and beyond - 3%. Certainly not as good as what we had five years, but not ridiculously low either.

Given the coming change of policy at the Fed, better to stick with the 3 year certificate? Or should I go with the 5-year CD?

I hope you all have a Happy New Year!
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We have some PedFed CDs maturing 2-4-14. We have decided to go for the 5yr. maybe PenFed will up the interest a little more by then. We will opt for the 5 yr. at least that is the plan for now.
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I went for the five-year 3% CD finally. I figure it will be at least a year before Penfed or anyone else goes higher than that.
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If you do the math, if you take the 5 year and surrender at 3 years the effective earnings are at least as high as the rate Pen Fed offers for a 3 year CD.
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If you do the math, if you take the 5 year and surrender at 3 years the effective earnings are at least as high as the rate Pen Fed offers for a 3 year CD.

If this is the case, why would anyone ever opt for a 3 over a 5?
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Because they are bad at math?
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If you do the math, if you take the 5 year and surrender at 3 years the effective earnings are at least as high as the rate Pen Fed offers for a 3 year CD.

Very good point! The five year CD does appear to be the wisest choice. I don't see rates sinking again any time soon, so seven years is unnecessary. Nor do I see rates going up rapidly, though credit unions like Penfed will gradually raise CD rates. Five years appears the ideal compromise.
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Basically, the 5 year CD includes a free "put" at 3 years (or at any other time beyond 6 months, but for this comparison it is at 3 years).
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