Negotiable Certificates of Deposit are:

• A. Non-negotiable fixed deposits
• B. Bank-issued time deposits that are negotiable in the secondary market
• C. Government savings certificates
• D. Short-term municipal notes

Answer: (B)

This describes the liquidity feature of bank deposits: a negotiable certificate of deposit is a bank-issued time deposit that can be traded in the secondary market. Unlike ordinary non-transferable CDs, negotiable CDs are issued in large denominations and can be bought or sold before they mature, providing both the bank and the investor with flexibility. The price and yield in the secondary market reflect current interest rates and the remaining time to maturity, not just the stated coupon. They are distinct from government savings certificates or municipal notes, which are issued by government entities and are not typically traded in the banks’ secondary market.