Question

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.

Answer 1

I say the answer is

B

hope this helps!!

Answer 2

The correct answer is B.

While there are almost no restrictions when a customer of a bank wants to withdraw money from his/her savings account, a certificate of deposit is a bank product that consists on depositing money in a bank for a longer period of time, and its owner cannot use it meanwhile.

Therefore, the owner of the money is exposed to a higher risk in the case of the certificate of deposit, because until the expiration of the contract he might need the money and he will not able to withdraw it from the bank. The higher the risk, the higher the retribution (interest rate) that the owner of the funds will demand to be willing to deposit them in the bank.