When Nellie's uncle died, he left her $5,000. Since she doesn't plan to spend the money anytime soon, she decides to open an account that will guarantee her a fixed interest rate of 5 percent for five years. With this type of account, if she withdraws funds before the 5 years pass, she will have to pay a substantial penalty. What type of account did Nellie open?

Question

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In this scenario, Nellie opened a certificate of deposit, which is a savings account that guarantees the depositor a set interest rate over a specified interval of time as long as the funds are not withdrawn before the end of the interval. Money may be withdrawn from these accounts prematurely only after paying a substantial penalty.

When Nellie's Uncle Died, He Left Her $5,000