We are all used to the conveniences that come with modern banking. We can have o
ID: 3005658 • Letter: W
Question
We are all used to the conveniences that come with modern banking. We can have our salary paid directly in our bank account, pay our bills online and pay for purchases with a cash card. This week you are learning about one of the most basic services that a bank offers: the checking account. Other types of accounts that a bank offers are: Money Market Account, Passport Savings, or Certificate of Deposit. In this discussion, choose and research one of these three accounts. You can use the Internet to find information about the type of account or talk to a bank employee at your local bank. Post a summary of the account and some of the advantages and disadvantages of using it. Using only 75 to 150 words.
Explanation / Answer
Certificate of Deposit:
Certificate of Deposit (CD) refers to a money market instrument, which is negotiable and equivalent to a promissory note. It is either issued in demat form or in the form of a usance promissory note. Sold by banks, CDs are low-risk and relatively low-return investments suitable for cash you don’t need for months or years. If you leave the money alone during the investment period (known as the “term” or “duration”), the bank will pay you an interest rate slightly higher than what you would have earned in a money market or checking account. All gains from CDs are taxable as income, unless they are in a tax-deferred (IRA) or tax-free (Roth IRA) account.
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