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What is a Market-Linked CD?

A Market-Linked Certificate of Deposit (MLCD), also called an equity-linked certificate of deposit, is a type of certificate of deposit (CD) that is issued by a bank. Unlike a regular CD that has a fixed interest rate that is paid periodically, the return of an MLCD is based on the market performance of an underlier. The underlier can be an equity index, an exchange-traded fund (ETF), a single stock, a commodity, a currency or a basket of any of these.

At maturity, investors receive the full initial amount invested plus an additional amount based on the return of the underlier. Investors have downside protection if held to maturity and will receive at minimum their full principal invested if held to term.