When Liquidating a Traditional Certificate of Deposit (CD) Prior to Maturity

question 118

Multiple Choice

When liquidating a traditional certificate of deposit (CD) prior to maturity, the owner:

• A)must repay the interest due on the CD.
• B)must return it to the issuing institution.
• C)must refund the difference in the face value and market value of the CD to the issuing institution.
• D)must claim the interest earned by the bank by investing the CD amount.
• E)must deposit the amount equivalent to the CD amount in a savings account with the same bank.

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Definitions:

Conditional Order

Refers to an order in a legal or financial context that will only be executed if certain conditions are met.

Negotiable Instrument

A financial document, such as a check or promissory note, that contains a promise to pay a specific amount of money to the bearer or assignee, which can be transferred by endorsement or delivery.

Promissory Note

A financial instrument containing a written promise by one party to pay a certain sum of money to another party under specified conditions.

Revolving Line of Credit

A flexible loan arrangement which allows a borrower to use, repay, and re-borrow funds up to a certain credit limit.