In the Context of Financial Securities, Certificates of Deposit Are

question 76

Multiple Choice

In the context of financial securities, certificates of deposit are considered to be among the safest investment options because:

• A) they are insured by the Federal Deposit Insurance Corporation.
• B) they offer higher returns than most other types of investments.
• C) the rate of interest paid on them is often higher than the interest rate on corporate bonds.
• D) they can be cashed in before they mature without incurring any penalty.

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Definitions:

Sinking Fund

A fund established by an entity by setting aside revenue over time for the purpose of paying off debt or replacing a future expense.

Protective Covenants

Clauses in a contract or bond indenture that restrict the borrower from certain activities, aiming to protect creditors.

Real Rates

Interest rates or rates of return that have been adjusted for inflation, showing the real purchasing power of the amount.

Nominal Rates

Interest rates or rates of return on investment that have not been adjusted for inflation, representing the face value of financial instruments.