Question

Identify the financial instruments based on the following descriptions:

Issued by money-centered financial firms, these short- or medium-term insured debt instruments pay higher interest than a regular savings account. They are low-risk instruments and have low returns.
a) Certificates of Deposit
b) Money market mutual funds
c) Commercial paper
d) Corporate bonds

Answer 1

The financial instrument described is a Certificate of Deposit (CD), a low-risk insured debt instrument with higher interest than savings accounts, and is FDIC insured.

Step-by-step explanation:

Based on the description provided — issued by money-centered financial firms, these short- or medium-term insured debt instruments pay higher interest than a regular savings account, are low-risk, and have low returns — the financial instrument in question is a Certificate of Deposit (CD). These are time deposits held at a bank or financial institution that offer fixed interest rates over a specified term. CDs are typically insured by the Federal Deposit Insurance Corporation (FDIC), which adds to their safety as an investment option.