Which of the following describes certificates of deposit interest arrangements?

• A. Fixed, variable, or issued at a discount to par value
• B. Fixed only
• C. Variable only
• D. Always at par

Answer: (A)

Interest arrangements for certificates of deposit describe how the return to the investor is set. CDs can have a fixed rate of interest for the term, so the payment is predictable and stays the same. They can also have a variable rate that adjusts with a reference rate or index. In some markets, CDs are issued at a discount to par value, meaning you pay less than the face value and the gain comes from receiving par at Maturity. Because CDs can be fixed, variable, or issued at a discount to par, the description that covers all three options is the most accurate.