Question

What are CDs (certificates of deposit)? Do rates on CDs typically increase as the term of the CD increases, or do rates typically decline? Explain. What is the typical penalty if a customer withdraws funds from a CD before it has matured?

          What are CDs (certificates of deposit)? Do rates on CDs typically increase as the term of the CD increases, or do rates typically decline? Explain. What is the typical penalty if a customer withdraws funds from a CD before it has matured?
        
Show more…

Added by James F.

Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
AceChat toggle button
Close icon
Ace pointing down

Please give Ace some feedback

Your feedback will help us improve your experience

Thumb up icon Thumb down icon
Thanks for your feedback!
Profile picture
What are CDs (certificates of deposit)? Do rates on CDs typically increase as the term of the CD increases, or do rates typically decline? Explain. What is the typical penalty if a customer withdraws funds from a CD before it has matured?
Close icon
Play audio
Feedback
Powered by NumerAI
Jennifer Stoner David Collins
Kathleen Carty verified

Azat Nurmukhametov and 85 other subject Microeconomics educators are ready to help you.

Ask a new question

*

Labs

-

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

*

Key Concepts

-
Key Concept
Premium Feature
Explore the core concept behind this problem.
Play button
Key Concept
Premium Feature
Explore the core concept behind this problem.
Your browser does not support the video tag.

*

Recommended Videos

-
which-of-these-is-a-characteristic-of-certificates-of-deposit-cds-banking-how-to-manage-your-money-pre-test-complete-90-attempt-1-10-which-of-these-is-a-characteristic-of-certificates-of-dep-32313

Which of these is a characteristic of certificates of deposit (CDs)? They are always offered at variable rates. They last for a set period of time. They can be opened with any amount of money. They do not allow access to the money at any time without penalty.

Azat N.

certificate-of-deposit-cd-as-they-are-more-commonly-known_-pays-simple-interest-this-is-an-investment-where-you-agree-to-leave-your-deposit-untouched-for-fixed-amount-of-time-and-in-exchange-72387

A certificate of deposit, or a CD as they are more commonly known, pays simple interest. This is an investment where you agree to leave your deposit untouched for a fixed amount of time, and in exchange you are guaranteed a certain percentage interest. Below are some CD rates listed Jun 2019 from Bankrate.com for CD's with a 1-year term. Institution Rate Min Deposit SallieMae 2.66% $2,500 CapitalOne 2.4718% $0 Investors eAccess 2.663% $500 a. For a $2,500 investment, how much more would you earn if you chose SallieMae over Capital One? b. If your goal was to earn $100 in interest the first year on that $2,500 investment, what interest rate would you need to find? c. If you get the same rate that SallieMae is offering for a longer length of time, how long would you need to invest to get that $100 interest you were shooting for?

Rebecca B.

a-certificate-of-deposit-pays-4-interest-compounded-quarterly-what-effective-interest-rate-does-the-cd-pay-round-to-the-nearest-tenth-when-necessary-54862

A certificate of deposit pays 4 % interest compounded quarterly. What effective interest rate does the CD pay? Round to the nearest tenth when necessary.

Bailey C.


*

Recommended Textbooks

-
Principles of Economics

Principles of Economics

Gregory Mankiw 8th Edition
achievement 1,887 solutions
Principles of Microeconomics for AP® Courses

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw, David Shapiro, Timothy Taylor 2nd Edition
achievement 1,503 solutions
Economics

Economics

Michael Parkin 12th Edition
achievement 1,333 solutions

*

Transcript

-
0:00 Hello.
00:02 The question is which of this is a characteristic of certificates of deposit? let me remind you that certificate of deposit is a savings product that earns interest on a lump sum.
00:23 So it's a fixed interest.
00:28 For a fixed amount of money, for a fixed period, for a fixed period.
00:33 Of time.
00:35 So basically we have fixed interest, fixed amount of money, and fixed a period of time.
00:56 For example, six months, fixed period of time.
01:06 Now let's look to answer options.
01:09 The first one, a, they are always offered variable rates.
01:14 So variable rates is not correct.
01:16 As i said, interest rate is fixed, so it's interest rate and it's fixed, so a is not correct.
01:24 B, they last for a set period of time...
Need help? Use Ace
Ace is your personal tutor. It breaks down any question with clear steps so you can learn.
Start Using Ace
Ace is your personal tutor for learning
Step-by-step explanations
Instant summaries
Summarize YouTube videos
Understand textbook images or PDFs
Study tools like quizzes and flashcards
Listen to your notes as a podcast
Continue solving this problem
Create a free account to:
  • View full step-by-step solution
  • Ask follow-up questions with Ace AI
  • Save progress and study later
Continue Free
Join the community

18,000,000+

Students on Numerade


Trusted by students at 8,000+ universities

Numerade

Get step-by-step video solution
from top educators

Continue with Clever
or



By creating an account, you agree to the Terms of Service and Privacy Policy
Already have an account? Log In

A free answer
just for you

Watch the video solution with this free unlock.

Numerade

Log in to watch this video
...and 100,000,000 more!


EMAIL

PASSWORD

OR
Continue with Clever