Suppose you deposit money in a certificate of deposit (CD)at a bank.Which of the following statements is TRUE?
A)The bank is borrowing money from you without a promise to repay that money with interest.
B)The bank is lending money to you with a promise to repay that money with interest.
C)The bank is technically renting money from you with a promise to repay that money with interest.
D)The bank is lending money to you,but not borrowing money from you.

Question

Quizplus · Accepted Answer

When you deposit money in a certificate of deposit (CD) at a bank, you're technically renting money to the bank. The bank promises to repay the principal amount along with interest at a specified rate within a predetermined period. In other words, you're lending money to the bank and earning interest income on your deposit. Therefore, option C is correct. Option A is incorrect because the bank promises to repay your money along with interest. Option B is incorrect because the bank is not lending money to you; it's borrowing money from you. Option D is also incorrect because the bank is not borrowing money from you, but it's accepting deposits from you.

Suppose You Deposit Money in a Certificate of Deposit (CD)at