Financial Markets and Institutions Exam 1 Practice

CDs are time deposits with fixed maturity. This means a certificate of deposit locks in a principal amount for a specific period, and the principal is repaid at a set date along with interest. Early withdrawal usually carries a penalty, underscoring the fixed-term nature. Among the options, the one that states CDs are time deposits with fixed maturity directly describes this feature. The other items describe different instruments that aren’t bank time deposits with a fixed date for repayment (T-bills are government short-term securities and often issued at a discount, not time deposits; commercial paper is short-term unsecured corporate debt; repos are secured short-term funding). So this choice best reflects the feature.