Question

A variety of different savings products are offered by financial institutions. Two of the most frequently sold savings investments are statement (or passbook) savings accounts and certificates of deposit (CDs). How do they differ? Read the following statements and classify each as to whether it applies to a statement savings account, a certificate of deposit, or both.

Certificate of Deposit Statement Savings Account
Statement
1. The interest rate can be either fixed or variable over the life of the account.
2. The account has no fixed maturity or end; if you maintain the minimum required balance in the account and the institution does not cease doing business, the account could earn interest over your entire lifetime.
3. The account often earns a higher interest rate than the rate earned on NOW and share draft accounts.
4. If you withdraw your funds prior to the account's specified maturity, it is possible to end up with less money than you originally deposited.
5. The account offers you greater flexibility with regard to the frequency and number of deposits and withdrawals.

Answer 1

A statement savings account can be drawn upon any time the customer requires cash (on demand). The customer can also deposit cash into the account at any time. The interest rate payable on the deposits is not fixed but fluctuates. A statement savings account is opened for a life-time and there is no fixed time for the deposits to stay.

The duration for which the Certificates of Deposit will be saved is fixed. A customer is not freely allowed to withdraw and deposit into the account. The customer withdraws at maturity. The interest rate is fixed and cannot be altered.

1. Both

2. Statement Savings Account

3. Certificate of Deposit

4. Certificate of Deposit

5. Statement Savings Account

Step-by-step explanation:

A statement (or passbook) savings account is an ordinary savings account opened in a bank for depositing and withdrawing money regularly as needed by the customer.

A Certificate of Deposit (CD) is a fixed-term duration savings account, which is opened in a bank to enable the customer deposit some fixed amount that will not be withdrawn regularly by the customer until the maturity date. CDs are called time deposits because of the fixed time the deposits must stay.