Which statement about Certificate of Deposit (CD) is true?

• A. A CD is a savings certificate that bears a maturity date, fixed rate, and is insured by the FDIC; term ranges from one month to five years.
• B. A CD can be cashed out at any time without penalty.
• C. A CD does not pay interest.
• D. A CD is only issued to large corporations.

Answer: (A)

A CD is a time deposit that functions as a savings certificate with a fixed interest rate and a set maturity date. It is insured by the FDIC, which protects your deposit up to the insured limit at the bank. The idea that the term can range from one month to five years reflects the typical maturities offered for CDs, giving you a guaranteed rate for a defined period. This combination of a fixed rate, a defined payoff date, and FDIC insurance is what makes CDs a low-risk way to grow savings.

It’s important to remember CDs aren’t cashing out whenever you want without penalty—early withdrawals usually incur a penalty and you forfeit some or all interest. They also do pay interest, not “not pay.” And they aren’t limited to large corporations; individuals can open CDs as well.