Which of the following is characteristic of a certificate of deposit?
A) It is a flexible investment option, funds can be withdrawn whenever required.
B) It results in a financial penalty if the funds are withdrawn before the term expires.
C) It is completely opposite to a savings account.
D) It does not provide any interest on the invested amount.

Question

Quizplus · Accepted Answer

A certificate of deposit (CD) typically has a fixed term with a set interest rate. If the funds are withdrawn before the term expires, there is usually a penalty, which is a disincentive for early withdrawal. Option A is incorrect because CDs are not typically flexible investments. Option C is incorrect because a CD is a type of savings account. Option D is incorrect because a CD does provide interest on the invested amount, although the interest rate may be lower than other types of investments.

Which of the Following Is Characteristic of a Certificate of Deposit