ARLINGTON, Va. - E-Trade Bank has introduced PrimeLink CD, a certificate of deposit whose rate is automatically changed weekly to track the prime rate.
If the prime rate drops, customers will not lose any of their principal. Interest is compounded daily, and customers can receive it monthly or quarterly.
The spread - the difference between the prime rate and the interest rate earned on the CD - is guaranteed for the product's term. For example, the one-year CD offers a spread of prime minus 3.25%; the two-year CD, prime minus 3.1%; and the three-, four-, and five-year CDs, prime minus 3%.
The product was unveiled last month. It was designed for people seeking to capitalize on a future rise in interest rates while protecting their principal investment, the bank said.
E-Trade Bank, a subsidiary of E-Trade Group Inc., has more than $12 billion of assets and 400,000 customer accounts.