Herb Has $20,000 in an Interest-Bearing Time Deposit with the Applebottom

question 302

Multiple Choice

Herb has $20,000 in an interest-bearing time deposit with the Applebottom Bank and Trust Company. While earning a relatively attractive rate of interest, Herb had to agree to not withdraw any of the funds until the end of a three-year period. Herb's investment represents a(n) :

• A) passbook savings account.
• B) negotiable order of withdrawal (NOW) account.
• C) individual deferred earnings account (IDEA).
• D) certificate of deposit (CD).

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Definitions:

Rate of Return

A measure of the gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Cram-Down Round

A financing round typically at a lower valuation, in which existing shareholders have their shares diluted if they do not participate.

Founders' Ownership

The proportion of a company's equity that is owned by its original creators or founders.

Dilution

A reduction in the ownership percentage of a share of stock caused by the issuance of new shares.