Question

1) Please explain the following terms: savings account, basic savings account, interest bearing checking account, money market deposit accounts, and certificate of deposits

2) What is the difference between a bond and a certificate deposit

Answer 1

1. Savings account : This is a type of account wherein an individual gets to deposit and withdraw amount as and when needed. The amount accrued in the account earns a particular rate of interest for a period. Any number of deposits and withdrawals can be made in this type of account.

2. Basic Savings Account : This type of account is similar to a savings account except that its has a limitation on the number of withdrawals and deposits that can be made to this account. It is the most basic type of account in any bank.

3. Interest bearing Checking account: An interest bearing checking account is a type of checking account that yields interest on the money that is in an individual's account. Not all checking accounts are interest bearing accounts, rather interest checking accounts can be used as standard checking accounts.

4. Money Market deposit account : This is a type of account where the bank pays interest based on present into rest rates in money markets. These interest rates are usually higher than the ones offered for savings account. These type of accounts also attract higher minimum balances.

5. Certificate of deposits: This is a type of deposit which is issues for a specific time period for a certain amount wherein the interest rate ia either fixed or variable

2. Bonds : These are risk free investments and are usually issued by companies which looks out for raising money to fund their operations. These type of investments have a lower risk except when the company goes bankrupt. Bonds are long term investments and usually take 10 or more years for maturity.

Certificate deposit - This type of investments are obtained only through banks. Returns obtained from certificate deposits are usually lower than the bonds but are comparatively higher than a savings account. Certificate deposits unlike bonds have a shorter maturity period and are low risk investments.