Which savings instrument is best described as a fixed-term product that often imposes penalties for early withdrawal?

Which savings instrument is best described as a fixed-term product that often imposes penalties for early withdrawal?

• A. Savings Account
• B. Money Market Fund
• C. Bond
• D. Certificate of Deposit

Answer: (D)

A fixed-term deposit that imposes an early withdrawal penalty is a certificate of deposit. It locks your money for a set period—months or years—in exchange for a higher rate than a regular savings account. If you take the money out before the term ends, you typically lose part or all of the earned interest (and sometimes face a penalty on the principal). This makes CDs distinct from other options: a savings account is usually very liquid with little to no penalty, a money market fund is an investment with fluctuating value and no built-in withdrawal penalty, and a bond is a debt instrument whose return depends on market conditions rather than a fixed early-withdrawal penalty.

A fixed-term deposit that imposes an early withdrawal penalty is a certificate of deposit. It locks your money for a set period—months or years—in exchange for a higher rate than a regular savings account. If you take the money out before the term ends, you typically lose part or all of the earned interest (and sometimes face a penalty on the principal). This makes CDs distinct from other options: a savings account is usually very liquid with little to no penalty, a money market fund is an investment with fluctuating value and no built-in withdrawal penalty, and a bond is a debt instrument whose return depends on market conditions rather than a fixed early-withdrawal penalty.