I asked ChatGPT these questions in a series. You can check out the responses in the attachment:
- I have some money that I want to save into retirement. What are my best options?
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If I could get a CD that had a market value daily redemption value like a U.S. Treasury, however, if interest rates rose, the fee for early withdrawal would be capped at the same level as the standard CD, should I do that rather than a standard CD?
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Here is a publication written about Market Value CDs https://bankbeat.biz/how-term-deposits-can-reclaim-their-crown/
- If the CD investment goes to maturity, the early withdrawal feature is unused. If it is withdrawn early and the standard classic CD has a fixed penalty while the market value CD has a variable penalty that is always equal to or less than the standard CD and if interest rates fall the market value CD pays a bonus for early withdrawal, why would anyone who was informed of the details ever select the standard classic CD?
ChatGPT Conclusion:
From a purely rational standpoint, an informed depositor would rarely, if ever, select a standard CD over a market value CD, assuming the features you've described. However, behavioral factors like familiarity, perceived simplicity, or lack of product availability might still lead to the selection of a standard CD.
If financial institutions make market value CDs more widely available and educate consumers about their benefits, these products could become the preferred choice for informed savers.
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What do you think?
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Neil Stanley
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