When Purchasing a Certificate of Deposit (CD)

question 29

Multiple Choice

When purchasing a certificate of deposit (CD) ,

• A) you are always better off to buy the longer-term CDs.
• B) you will earn more interest percentage-wise on the lower dollar CDs.
• C) the amount you invest is at risk, so choose carefully.
• D) it is wise to shop around as rates vary among financial institutions.

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Definitions:

Least-Squares Regression

A statistical technique used to find the line of best fit for a set of data, minimizing the sum of the squares of the differences between the observed and predicted values.

Variable Cost

Costs that vary directly with the level of production output or activity, such as materials and labor directly involved in manufacturing.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, over a specified period.

High-Low Method

A technique in managerial accounting used to estimate fixed and variable costs by analyzing the highest and lowest levels of activity and the associated costs.