Question

Pam has $500 she wants to invest. She wants to earn the most possible interest and doesn't need the money for a year. What account should she utilize to house the money?

a. Checking account
b. Money market account
c. Certificate of deposit (CD)
d. Savings account

Answer 1

To earn the most possible interest on $500, Pam should consider utilizing a Certificate of Deposit (CD), which offers higher interest rates than regular savings accounts.

Step-by-step explanation:

To earn the most possible interest on her $500 investment, Pam should consider utilizing a Certificate of Deposit (CD). With a CD, she agrees to deposit a certain amount of money for a stated period of time, typically ranging from a few months to several years. In exchange, the bank offers a higher interest rate than a regular savings account.

CDs are a good option for long-term savings because they provide a fixed interest rate and are FDIC insured, meaning that the money is protected by the government up to a certain amount. However, there is a substantial penalty for early withdrawal.