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.

If you buy a $1,000 CD for only $600, what type of CD is it?

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Add-on CD

Discount CD

Credit union CD

Bargain-rate CD

Discount CD. To be discounted is to be sold for less than face value.

If you want to increase the deposit on your CD periodically, you can do so by buying _________.

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A stock-index CD

An add-on CD

A discount CD

An add-on CD. With an add-on CD, you can add funds throughout the life of the CD.

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.

A certificate of deposit of ________ is called a small-savings CD.

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$100,000 or more

Any amount

Less than $100,000

Less than $100,000. Small-savings CDs exist only in amounts less than $100,000.

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