Income Beginner: Introduction to Certificates of Deposit (CDs)

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1.
If you want to increase the deposit on your CD periodically, you can do so by buying _________.
Choose wisely. There is only one correct answer.
An add-on CD. With an add-on CD, you can add funds throughout the life of the CD.
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.
Financial institutions are allowed to compound certificate rates as they wish.
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True. They may compound rates daily, weekly, or monthly.
4.
To be quoted on the NASDAQ, a negotiable certificate of deposit must have a maturity of at least _______.
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14 days. This is the minimum maturity.
5.
The alternative to a fixed-rate certificate of deposit (CD) is a(n) _________.
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Variable-rate CD. This rate changes periodically along with the market.