Income Beginner: Introduction to Certificates of Deposit (CDs)

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1.
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.
2.
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.
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.
You can buy negotiable certificates of deposit in any amount.
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False. You can buy them only in amounts over $100,000.