SIE Exam Question 803: Answer and Explanation

Question: 803

Which of the following is correct regarding certificates of deposit (CDs)?

• A. They are short-term securities that may be bought or sold in the open market at a market-determined price.
• B. They typically invest in high-quality, short-term investments, such as commercial paper, Treasury bills, and money market funds.
• C. They are known as "time deposits."
• D. The financial institution typically pays a variable rate of interest for the term of the CD.

Correct Answer: C

Explanation:

Certificates of deposit (CDs) are known as "time deposits." They are deposits made with a bank for a specified period of time.