A certificate of deposit pays a higher interest rate than a savings account because the money is A. guaranteed by the government.
B. kept by banks for a longer time period.
C. loaned to banks by consumers.
D. immediately available to consumers.
A certificate of deposit pays a higher interest rate than a savings account because the money is
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The correct answer is B. kept by banks for a longer time period.
A certificate of deposit (CD) often pays higher interest rates than a savings account because the money deposited in a CD is typically held for a fixed term, which can range from a few months to several years. This means that the bank can use the funds for longer-term investments, allowing them to offer a better interest rate to consumers. In contrast, savings accounts allow for more immediate access to funds, which generally results in lower interest rates.