Question

Which of the following savings vehicles usually requires a high minimum balance?

a) simple savings account
b) Certificate of Deposit (CD)
c) Checking account
d) all of the above

Answer 1

A Certificate of Deposit (CD) usually requires a high minimum balance and offers a higher interest rate in exchange for leaving the money deposited for a set period.

Step-by-step explanation:

Among the options provided, a Certificate of Deposit (CD) usually requires a high minimum balance. CDs involve depositing a lump sum of money, often in the thousands of dollars, for a fixed period, which can range from several months to a few years. In exchange for committing to leave your money in the CD for the agreed period, banks offer a higher interest rate than standard savings accounts. It's important to note that while funds can be withdrawn early from a CD, there is typically a substantial penalty for doing so.

Answer 2

Certificate of deposit (CD). A certificate of deposit is an investment vehicle whereby an investor's money is able to earn a higher rate of interest than a regular account. In this type of investment, the funds are 'locked in' for a predetermined period, often with a guaranteed rate of return. Some institutions allow investments as low as $100 but it is recommended to buy CDs of over $100,000 to $250,000 as this is the minimum amount that is insurable thus making the principle safe.