Which of the following best describes a certificate of deposit (CD)?

A certificate of deposit (CD) is a financial product offered by banks and credit unions that allows an individual to deposit a fixed amount of money for a specific period of time, which can range from a few months to several years. During this term, the funds remain untouched, and in return, the bank pays a predetermined interest rate that is typically higher than that of standard savings accounts. At the end of the specified term, the original investment amount and the accrued interest are returned to the depositor.

This characteristic of having a fixed deposit for a designated time frame accurately captures the essence of a CD. It emphasizes the stability and predictability associated with this savings instrument, as individuals know exactly how much they will earn in interest by the term's end, making it a conservative investment option.

The other descriptions do not capture the key features of a CD. For example, stating that a CD has a variable term contradicts its defining attribute of having a fixed duration. Describing it as high-risk with potentially high rewards fails to align with the conservative nature of CDs, which are designed for safety and guaranteed returns. Lastly, a checking account earning interest does not resemble the structure or function of a CD, as checking accounts typically provide liquidity and immediate access to