Entry Exam Category: High School Equivalency Exams
Course: HiSET
Exam: HiSET Social Studies Practice Test
Practice Question
What does it mean if a bank's advertisement for a certificate of deposit (CD) indicates a 4% APY?
Answer Choices
- A: The CD matures at the rate of 4% each year.
- B: Only 4% of the CD's value can be withdrawn in any given year.
- C: You will pay 4% of the CD's value each year in service fees.
- D: The CD will earn 4% interest each year that is then added to the CD's balance.
Correct Answer: D
Rationale: APY (Annual Percentage Yield) is the interest earned on a CD annually, added to the balance, accounting for compounding.