Which savings vehicle pays a fixed rate of interest on money held for an agreed period?

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Multiple Choice

Which savings vehicle pays a fixed rate of interest on money held for an agreed period?

Explanation:
Fixed-rate, time-bound deposits lock in an interest rate for a specific period. A certificate of deposit does exactly that: you deposit money for a set term, and the bank pays a guaranteed rate of interest for that term. You typically can’t withdraw the funds without a penalty until the maturity date, which protects the interest rate until it ends. The other options don’t fit: a money market fund offers variable yields and no fixed maturity, and asset allocation or diversification are strategies, not savings vehicles with a guaranteed rate. Therefore, the savings vehicle described is a certificate of deposit.

Fixed-rate, time-bound deposits lock in an interest rate for a specific period. A certificate of deposit does exactly that: you deposit money for a set term, and the bank pays a guaranteed rate of interest for that term. You typically can’t withdraw the funds without a penalty until the maturity date, which protects the interest rate until it ends. The other options don’t fit: a money market fund offers variable yields and no fixed maturity, and asset allocation or diversification are strategies, not savings vehicles with a guaranteed rate. Therefore, the savings vehicle described is a certificate of deposit.

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