Question

What makes CDs and money market accounts low-risk investments? They have a high interest rate. They are insured by the government. They carry the promise of high profits. They are loans to the federal government.

Answer 1

CDs and money market accounts are low-risk because they are insured by the FDIC up to $250,000, providing government-backed security, and offer easier access to funds and fixed interest rates. Therefore the correct answer is They are insured by the government.

Step-by-step explanation:

CDs (certificates of deposit) and money market accounts are considered low-risk investments primarily because they are insured by the government through the Federal Deposit Insurance Corporation (FDIC). This insurance covers deposits up to $250,000, ensuring that even if a bank fails, the government will reimburse investors up to this amount. Furthermore, these financial vehicles offer easier access to funds than other investments, which contributes to their safety and liquidity. CDs are essentially interest-bearing loans to a bank or government, with fixed terms and interest rates, contributing to their predictability and low risk. Money market accounts, similarly, offer very secure options for investors with relatively quick access to their money compared to other types of investments.