Question

which of the following investments is characterized by the following traits:
insured by the fdic or ncua
lowest interest rate of all investments
number of withdrawals per month may be limited
a. money market
b. traditional savings account
c. exchange - traded fund (etf)
d. certificate of deposit (cd)
what is the term used to describe interest earned on interest gained?
a. compound interest
b. simple interest
c. principal
d. capital

Explanation:

First Question (Investment Traits)

To solve this, analyze each option:

• a. Money market: Often has higher rates than traditional savings, not lowest.
• b. Traditional savings account: FDIC/NCUA insured, lowest interest among these, may have withdrawal limits (e.g., 6 per month as per regulations).
• c. ETF: Not insured by FDIC/NCUA, and has market - related returns, not low - interest.
• d. CD: Usually has higher interest than savings accounts and has fixed terms, not the lowest rate.

• a. Compound interest: Defined as interest earned on both principal and previously earned interest (interest on interest).
• b. Simple interest: Calculated only on the principal amount, no interest on interest.
• c. Principal: The initial amount of money invested or borrowed, not related to interest on interest.
• d. Capital: Refers to financial assets or resources, not the term for interest on interest.

Answer:

b. Traditional savings account

Second Question (Interest Term)