Answer:
If we decide to cash in the CD before its maturity date, we'll usually need to pay a penalty out of some of the interest that we've earned.
Explanation:
Certificates of deposit (CDs) are also called time deposits or term deposits. When we create a CD, the bank accepts the deposit for a fixed term for a predefined period and pays the interest on it until maturity. At the end of the term we can cash in the CD for the principal plus the interest that we've earned, or alternatively we may move on the account balance over to a new CD. We must inform the bank about our decision before the CD matures. Else the bank will automatically move over the previous CD to a new CD for the same amount of time at the current rate of interest.
If we decide to cash in the CD before its maturity date, we'll usually need to pay a penalty out of some of the interest that we've earned.