Final Answer:
Certificates of Deposit (CDs) do not pay periodic interest but accumulate interest over their term. This distinguishes them from investments like bonds, stocks, and savings accounts. With CDs, the investor receives the total amount (principal + interest) at the end of the agreed-upon period. 4) Certificate of Deposit (CD).
Step-by-step explanation:
Certificates of Deposit (CDs) are financial instruments that do not pay periodic interest payments but rather accumulate interest over the life of the investment. When you invest in a CD, you agree to deposit a certain amount of money with a bank for a specified period. In return, the bank pays you interest on the principal, and this interest is typically compounded at regular intervals, such as monthly or annually.
The lack of periodic interest payments distinguishes CDs from other investment options like bonds or savings accounts. In the case of bonds, investors often receive periodic interest payments, known as coupon payments, throughout the bond's term. Savings accounts also provide regular interest payments on the account balance. Stocks, on the other hand, generate returns through capital appreciation and dividends, which are not guaranteed and may not be regular.
CDs offer a fixed interest rate for a predetermined period, and the interest is added to the principal, compounding over time. The investor receives the total amount (initial principal plus accumulated interest) at the end of the CD's maturity. This structure can be appealing to those seeking a predictable return and willing to lock in their funds for a specific duration. Hence 4) Certificate of Deposit is the correct answer.