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Ben and Divya have inherited a sum of money they will use for a down payment on a new house in the next two months. Which of these savings options is best for this inheritance?

A. Savings bond
B. Money market account
C. Certificate of deposit
D. Savings account​

1 Answer

2 votes

Final answer:

A certificate of deposit (CD) generally requires money to be locked in for a period of time and incurs a penalty for early withdrawals, which is not ideal for Ben and Divya's short-term needs. A savings account or money market account offers more flexibility and immediate access to funds, making them better options for a down payment on a house in the next two months.

Step-by-step explanation:

For Ben and Divya, who are planning to use their inheritance for a down payment on a house in the next two months, the best savings option should offer both flexibility and a decent return. A certificate of deposit (CD) may not be ideal in this case, as it typically requires that money be locked in for a set period of time, and early withdrawal can incur a substantial penalty. In comparison, a savings bond usually takes longer to mature, a money market account may offer lower interest rates but with more flexible access to funds, and a regular savings account would offer the most liquidity, with generally lower interest rates but without penalties for early withdrawal. Considering their short-term requirement, a savings account or a money market account would likely be the most suitable options, with the latter potentially providing a slightly higher rate of return.

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