Final answer:
A money market account is often used for overnight uninvested fiduciary cash needs under the UPIA, due to its stability and liquidity. A certificate of deposit (CD), while also a secure financial asset, typically locks funds for a fixed period and is not suitable for overnight investments due to penalties for early withdrawal.
Step-by-step explanation:
A type of investment that is often used to manage overnight uninvested fiduciary cash, by the Uniform Principal and Income Act (UPIA), is a money market account. Money markets are preferred for such purposes because they offer liquidity and a stable value, which is ideal for handling short-term, uninvested funds held by trustees. In contrast, a certificate of deposit (CD) requires funds to be deposited for a fixed period, often with a higher interest rate compared to regular savings accounts, but with penalties for early withdrawal that are not conducive to overnight investments.
Banks, acting as financial intermediaries, manage the demand for liquidity and safety by providing various accounts, such as checking accounts, savings accounts, and CDs. In the context of a financial asset, a CD represents an agreement where a financial institution pays a fixed interest rate for the duration of the deposit.
These financial instruments are insured by the FDIC, which helps mitigate the risk of bank failure, ensuring that depositors' funds are protected up to a certain limit. Investing in a CD is a decision that involves balancing the return, risk, and liquidity of the asset according to individual or institutional preferences.