Gwen deposits $5,000 with Home State Bank on July 1, 2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1, 2021. Home State Bank issued to Gwen
A) a certificate of deposit.
B) a check.
C) a nonnegotiable instrument.
D) a trade acceptance.

Question

Gwen deposits $5,000 with Home State Bank on July 1, 2016. Home State Bank promises to repay Gwen the $5,000 plus 3 percent annual interest on July 1, 2021. Home State Bank issued to Gwen
A) ​a certificate of deposit.
B) ​a check.
C) ​a nonnegotiable instrument.
D) ​a trade acceptance.

Quizplus · Accepted Answer

A certificate of deposit is a time deposit with a bank where the depositor agrees to keep the funds on deposit for a specified period of time, in exchange for a fixed rate of interest. This scenario describes a typical certificate of deposit, as Home State Bank is promising to repay Gwen with interest on a specific date in the future.

Gwen Deposits $5,000 with Home State Bank on July 1