Income Beginner: Introduction to Certificates of Deposit (CDs)

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1.
If you buy a $1,000 CD for only $600, what type of CD is it?
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Discount CD. To be discounted is to be sold for less than face value.
2.
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.
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.
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.
5.
Why are negotiable CDs called negotiable?
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Investors can negotiate the interest/dividend rates. Although investors can negotiate numerous properties of these CDs, the name comes from the privilege of negotiating the interest/dividend rates.