Final answer:
A call notice is likely to be issued on a long-term CD by financial institutions to terminate the CD before its maturity, usually due to falling interest rates, allowing them to reissue CDs at a lower rate.
Step-by-step explanation:
A call notice is likely to be issued on a long-term CD (Certificate of Deposit) under certain circumstances. A CD is an investment vehicle with a set maturity date, offering a relatively low rate of return compared to other investment options. Financial institutions may issue a call notice for a long-term CD when they want to terminate the CD before its maturity date, often because of a decline in interest rates. This allows the institution to reissue new CDs at a lower interest rate, reducing the amount of interest they have to pay out to depositors.
Long-term CDs are part of the capital market, which includes investment instruments with a maturity of more than one year. They are different from other instruments such as government savings bonds, IRAs, money market mutual funds, and small CDs, which have different terms and conditions associated with them. Issuing a call notice is an option for the institution, and not all CDs have this feature, so it is important for investors to be aware of the terms before investing in a CD.