Income Beginner: Introduction to Certificates of Deposit (CDs)

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You can buy negotiable certificates of deposit in any amount.

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True

False

False. You can buy them only in amounts over $100,000.

The alternative to a fixed-rate certificate of deposit (CD) is a(n) _________.

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Discount CD

Variable-rate CD

Add-on CD

Variable-rate CD. This rate changes periodically along with the market.

If you withdraw your money from a certificate of deposit before the maturity date, you will typically be penalized three to six months interest/dividends.

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True

False

True. On the average, the penalty is three to six months worth of earnings.

What is the denomination range for small-savings certificates of deposit?

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$0$10,000

$500$10,000

$1,000$100,000

Less than $100,000

Less than $100,000. Small-savings CDs may not exceed $100,000.

The length of time for which a certificate of deposit stays in the financial institution contributes to the size of its interest or dividend rate.

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True

False

True. Length of time is one factor among many that determine interest or dividend rates.

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