For which of the following markets is a certificate of deposit primarily used?

Prepare for the Canon Financial Institute CFIRS Exam with flashcards and multiple choice questions. Each question comes with hints and explanations for better understanding. Get ready to excel in your exam!

A certificate of deposit (CD) is primarily used in the banking market, functioning as a financial product offered by banks and credit unions. When an individual purchases a CD, they agree to deposit a sum of money for a specified term, during which the financial institution pays interest at a fixed rate. Upon maturity, the initial investment along with the accrued interest is returned to the depositor.

CDs serve as a reliable investment choice that allows individuals to earn interest with a low risk of loss, making them ideal for savers looking for a guaranteed return with minimal market risk. The associated term and interest rate can vary widely, giving investors flexibility in their savings strategies.

In contrast, the other markets mentioned—real estate, stock, and commodity—are not directly related to the function or investment purpose of a certificate of deposit. The real estate market involves tangible property transactions, stocks represent ownership in companies and can fluctuate significantly in value, and commodities pertain to physical goods traded on exchanges. Thus, the banking market is where CDs are predominantly utilized, as they are primarily savings instruments governed by banking regulations.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy