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Understanding Certificates of Deposit

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Questions and Answers

Which of the following statements is true regarding the maturity period of a Certificate of Deposit?

It typically matures after 14 days.

It ranges from 1 month to 2 years.

It ranges from 7 days to 1 year. (correct)

It is fixed at 6 months regardless of issued terms.

What is the typical minimum investment amount required to open a Certificate of Deposit?

₹1 lakh (correct)

₹10,000

₹25,000

₹50,000

What happens if an investor withdraws funds from a CD before its maturity?

Funds can be accessed without any penalties.

The investor receives a bonus interest rate.

There are usually penalties for early withdrawal. (correct)

There is an additional deposit required.

How does the interest rate on a Certificate of Deposit typically compare to that of a savings account?

<p>It is generally higher than that of a savings account.</p> Signup and view all the answers

Which feature of a Certificate of Deposit allows it to be more accessible for investors?

<p>Freely transferable without a lock-in period.</p> Signup and view all the answers

Study Notes

What is a CD?

A Certificate of Deposit (CD) is a type of fixed term investment product.
CDs typically offer higher interest rates than standard savings accounts.
The minimum investment amount required for a CD is ₹1 lakh.
Maturity periods for CDs range between 7 days to 1 year, depending on the bank.
CDs are freely transferable, which means they can be sold or assigned to another party without restrictions.
There is no lock-in period, allowing investors to access their funds after maturity without penalties.

Key Features of Certificates of Deposit

Early withdrawal from a CD incurs penalties, affecting overall returns.
Diversified issuance allows various types of investors to participate.
Offered by financial institutions, making them accessible to the public.
Provide a secure option for investment with predictable returns due to fixed interest rates.

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Description

This quiz explores the key features and benefits of Certificates of Deposit (CDs) as a fixed-term investment option. Learn about their interest rates, maturity periods, and accessibility for investors. Test your knowledge on how CDs can provide secure and predictable returns!