Question

1. what is a key characteristic of certificates of deposit (cds)?

a. they allow unlimited transactions each month
b. they have no minimum deposit requirements
c. they tie up money for a set period in exchange for higher interest rates
d. they offer high liquidity with instant access to funds

Explanation:

Certificates of Deposit (CDs) are time - deposits. When you invest in a CD, you agree to keep your money in the account for a specific period (term), such as 6 months, 1 year, or 5 years. In return for this commitment, the bank or financial institution offers a higher interest rate compared to regular savings accounts.

• Option a: CDs do not allow unlimited transactions. In fact, they are not as liquid as regular savings accounts in terms of frequent withdrawals.
• Option b: Most CDs have a minimum deposit requirement.
• Option d: CDs do not offer high liquidity with instant access. If you withdraw money before the maturity date, you may face penalties.

Answer:

C. They tie up money for a set period in exchange for higher interest rates