What term describes an account that guarantees a fixed interest rate and has a specified maturity date?

• A. CD
• B. Savings account
• C. Checking account
• D. Money market account

Answer: (A)

A certificate of deposit is an account that guarantees a fixed interest rate for a specific period and has a maturity date. When you open one, you lock in that rate for the term you choose—three months, six months, a year, etc.—and the money is meant to stay deposited until the term ends. At maturity you can withdraw your principal and the accrued interest, often with no penalties, though taking funds out early typically incurs a penalty. This combination of a fixed rate and a set end date is what distinguishes CDs from other accounts. Savings accounts usually have variable rates and no fixed term, checking accounts focus on everyday transactions with little or no interest, and money market accounts may offer higher yields but often have variable rates and withdrawal limits.