Question

Hich of the following are advantages of certificates of deposit (CDs) over savings accounts?

I. CDs are more readily accessible than savings accounts.
II. CDs offer greater interest rates than savings accounts.
III. CDs have greater FDIC backing than savings accounts.
a.I and II
b.I only
c.I and III
d.none of these

Answer 1

The advantages of certificates of deposit (CDs) over savings accounts include higher interest rates and greater FDIC backing.

Step-by-step explanation:

The correct answer to the question is c.I and III.

CDs (certificates of deposit) have two advantages over savings accounts:

1. CDs offer greater interest rates than savings accounts: With a CD, you agree to deposit a certain amount of money for a specified period of time. In return, the bank offers a higher interest rate compared to a regular savings account. This means that you can earn more money on your investment with a CD.
2. CDs have greater FDIC backing than savings accounts: The FDIC (Federal Deposit Insurance Corporation) protects the savings of the average person, and every bank is required to pay a fee to the FDIC based on their deposits. If a bank goes bankrupt and cannot repay depositors, the FDIC guarantees that all customers will receive their deposits back up to $250,000. This means that your money in a CD is safer and more secure compared to a regular savings account.

Therefore, the advantages of CDs over savings accounts are that they offer higher interest rates and greater FDIC backing.