Certificates of Deposit (CDs) Tend to Pay Higher Rates of Interest

question 24

Multiple Choice

Certificates of deposit (CDs) tend to pay higher rates of interest than money market accounts because

• A)CDs are not government insured and therefore are riskier investments than money market accounts.
• B)the required minimum investment for CDs is higher than for money market accounts.
• C)there are higher annual fees charged for CDs than for money market accounts.
• D)the investor agrees to leave his or her money in the CD for a specified period of time while he or she has free access to the funds in a money market account.

---

Definitions:

Fiscal Year-End

Fiscal Year-End is the conclusion of a 12-month accounting period for a business or organization, used for financial reporting and tax purposes.

Automatic Extension

A granted period beyond the original due date for filing tax returns without needing to explain the reason for the delay.

FMV

Fair Market Value, the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Basis

The amount of investment in something for tax purposes, used to calculate gain or loss when the property is sold.