Quiz: What do you know about CDs?

Investing » Risk Tolerance » Quiz: What Do You Know About CDs?

If you clicked on this headline thinking this was a quiz about music compact discs, don't feel bad.

A recent Bankrate survey finds that 45 percent of Americans are not very familiar, or are not at all familiar, with certificates of deposit.

That naivete jumps for the segment of the population that grew up after the era of eight-track tapes and 45s. The survey found that 69 percent of 18- to 29-year-olds don't know anything about CDs or are at most, only vaguely familiar with them.

See if you know more about CDs than the average consumer by taking our quiz.

What's been the average yield on a one-year CD for the past year? © iCreative3D/
Answer: A. 0.23 percent.

CD yields have been in free fall since the Federal Reserve dropped short-term interest rates to near zero in December 2008.
Next Question What is the definition of a CD? © mizar_21984/
Answer: B.

Answer A is the definition of a mutual fund, while answer C is the definition of a money market account.
Next Question Which of these would be an appropriate use of a CD? © Rrraum/
Answer: B.

In general, CDs require a time commitment during which a consumer is not supposed to touch the money, so it's not good as a short-term savings or checking replacement.
Next Question What is the most common early withdrawal fee for a two-year CD? © larry1235/
Answer: C.

According to Bankrate's latest survey of early withdrawal penalties for CDs, six months' interest is the most common penalty for pulling money out early from a two-year CD.
Next Question How many Americans have put money into a CD? © blvdone/
Answer: B.

Only 28 percent of consumers have put money in a CD. Younger consumers are much less likely than older consumers to have ever put money in a CD, Bankrate’s survey shows.
Next Question What is 'laddering' when it comes to CDs? © racorn/
Answer: A.

Laddering evens out rate fluctuations and makes cash available regularly. For instance, you can take $25,000 and invest equal amounts of it in one-year, two-year and five-year CDs. When the one-year matures, you can re-enroll it in a five-year CD.


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