Income Beginner: Introduction to Certificates of Deposit (CDs)

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1.
A certificate of deposit of ________ is called a small-savings CD.
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Less than $100,000. Small-savings CDs exist only in amounts less than $100,000.
2.
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. On the average, the penalty is three to six months worth of earnings.
3.
Compounding makes a yield _______ simple interest/dividends.
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Higher than. Compounding gives you additional earnings on top of the earnings youve already received.
4.
If you want to increase the deposit on your CD periodically, you can do so by buying _________.
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An add-on CD. With an add-on CD, you can add funds throughout the life of the CD.
5.
To be quoted on the NASDAQ, a negotiable certificate of deposit must have a maturity of at least _______.
Choose wisely. There is only one correct answer.
14 days. This is the minimum maturity.