Ask the expert: Where can I find 5 percent CD rates?

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Q: Is there any way I can get a guaranteed 5 percent interest rate? I'd be willing to lock my money up for as long as ten years to do it - is there a 10 year CD paying 5 percent?

A: 5 percent guaranteed interest rates may not be extinct, but you could at least say they are in hibernation right now. They may come back, but you aren't going to find them today.

The best CD rates MoneyRates.com could find for 10-year CDs were right around 3 percent. You could do a shade better if you invested in 10-year US Treasury bonds, which also have guaranteed interest and principal. However, this would mean investing in those bonds directly, rather than via a bond fund. The income yield on a bond fund often won't measure up to the stated yield on the underlying bonds, because of fees and trading activity. It takes at least $10,000 to invest directly in Treasury bonds efficiently.

You could get above 4 percent if you moved out to 30-year Treasuries, but then you'd run the risk that your principal might be down at the ten-year mark. The fact that interest rates are extremely low right now exacerbates the risk of a price decline in bonds going forward. An alternative for an even higher yield would be a corporate bond, but here you would no longer have your interest or principal guaranteed.

An alternative approach would be to give up on 5 percent interest for the moment, and look at shorter CDs. The best CD rates at the five-year mark are nearly as high as the best CD rates at ten years. This would give you a chance to reinvest five years sooner, which may be your best approach. After all, the best way to find guaranteed 5 percent interest rates in this environment may be to wait a few years.

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