Income Beginner: Introduction to Certificates of Deposit (CDs)

Test your knowledge

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Keep studying!

Review your answers below to learn more.

Compounding makes a yield _______ simple interest/dividends.

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Higher than

Lower than

The same as

Higher than. Compounding gives you additional earnings on top of the earnings youve already received.

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.

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.

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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