Question

Which of the following is NOT a true statement about brokered certificates of deposit?

a. They are redeemable at any time subject to an interest penalty based on the term of the CD.
b. They can be sold in the secondary market.
c. Yields are usually greater than rates obtainable at a 'local' bank.
d. None of the above.

Answer 1

The statement 'Yields are usually greater than rates obtainable at a 'local' bank' is NOT a true statement about brokered certificates of deposit.

Step-by-step explanation:

A brokered certificate of deposit is a type of investment where an individual can purchase a certificate of deposit (CD) through a broker-dealer rather than directly from a financial institution. Now, looking at the given options, we can see that the statement 'c. Yields are usually greater than rates obtainable at a 'local' bank' is NOT a true statement about brokered certificates of deposit. In fact, the yields on brokered CDs can be higher or lower than the rates offered by local banks depending on the market conditions and individual circumstances. Therefore, the correct answer is c. Yields are usually greater than rates obtainable at a 'local' bank.

The statement 'c. Yields are usually greater than rates obtainable at a 'local' bank' is NOT necessarily true regarding brokered certificates of deposit (CDs). The yields on brokered CDs can vary, and they may be higher or lower than the rates offered by local banks. The yield on a brokered CD is influenced by factors such as market conditions, interest rate trends, and the specific terms of the CD. While brokered CDs offer the advantage of diversification and access to a broader range of options, it does not guarantee consistently higher yields compared to local banks. Investors should carefully assess prevailing market conditions and consider their financial goals before choosing between brokered CDs and offerings from local banks to make informed investment decisions.

Answer 2

The statement that is NOT true about brokered certificates of deposit is d. None of the above.' All statements provided – redeemable at any time with a penalty, tradable on the secondary market, and usually higher yields – are indeed true concerning brokered CDs.

Step-by-step explanation:

Brokered CDs are different from traditional CDs offered by local banks in several ways. They may indeed be redeemed before maturity, subject to a penalty, can be sold on the secondary market, and typically offer higher yields. A certificate of deposit is an interest-bearing agreement with a bank for a fixed period and often for a higher interest rate in comparison to regular savings accounts. This financial product is considered a safe investment choice, but it does come with the inconvenience of having your money locked up for a certain period. Withdrawing the funds before maturity almost always results in a penalty.

Brokered CDs have these same basic principles but are purchased through brokerage firms. They typically offer higher interest rates (yields) compared to local banks, due to competition in the larger financial marketplace. Moreover, given that they are traded in a secondary market, they provide an added layer of liquidity over traditional CDs, which are often locked until maturity.