Multiple Choice
Which of the following types of accounting is most commonly associated with entry-level, at-will employment positions in organizations?
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1. Introduction to Accounting
Types of Accounting
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Which type of account is similar to a savings account but typically offers higher interest rates, fixed terms, and a fixed interest rate?
A
Current Account
B
Checking Account
C
Money Market Account
D
Certificate of Deposit (CD)
Verified step by step guidance1
Understand the characteristics of a Certificate of Deposit (CD): A CD is a type of account that typically offers higher interest rates compared to savings accounts, but it requires the depositor to commit their funds for a fixed term.
Compare the features of a CD with other account types: Unlike a Current Account or Checking Account, which are designed for frequent transactions, a CD is not meant for regular withdrawals and has penalties for early withdrawal.
Recognize the fixed interest rate aspect: CDs provide a guaranteed interest rate for the duration of the term, which is different from Money Market Accounts that may have variable interest rates.
Identify the fixed term requirement: CDs require the depositor to lock in their funds for a specific period, such as 6 months, 1 year, or more, which is not a feature of other account types listed.
Conclude that the correct answer is Certificate of Deposit (CD) based on its unique features of higher interest rates, fixed terms, and fixed interest rates.
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