ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Is the same thing as a savings account
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can be withdrawn at any time
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pays higher interest than a savings account but has a penalty for early withdrawal
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None of the above
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Detailed explanation-1: -It depends on the terms of your account. Federal law sets a minimum penalty on early withdrawals from CDs, but there is no maximum penalty. If you withdraw money within the first six days after deposit, the penalty is at least seven days’ simple interest.
Detailed explanation-2: -You might be charged the equivalent of three months’ interest for an early withdrawal from a CD that matures in six months or less. If you have a five-year CD, the penalty might be 12 months’ worth of interest or more.
Detailed explanation-3: -Higher Rates Compared to savings accounts or money market accounts, CDs potentially can offer higher interest rates on deposits. That’s because you agree to keep your money in the CD for a set time period. The interest rate and APY you earn depends on the bank, the CD term and the current interest rate environment.
Detailed explanation-4: -All you have to do is multiply the monthly interest rate (the annual interest rate divided by 12) by the number of months’ interest the penalty charges, then multiply that by the amount you’re withdrawing.