AICPA Exam CPA-Business Topic 2 Question 42 Discussion

Actual exam question for AICPA's CPA Business Environment and Concepts exam

Question #: 42
Topic #: 2

[All CPA Business Environment and Concepts Questions]

Which one of the following is not a characteristic of a negotiable certificate of deposit? Negotiable certificates of deposit:

AHave a secondary market for investors.

BAre regulated by the Federal Reserve System.

CAre usually sold in denominations of a minimum of $100,000.

DHave yields considerably greater than bankers' acceptances and commercial paper.

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. Negotiable CDs generally carry interest rates slightly lower than bankers' acceptances (which are drafts drawn on deposits at a bank) or commercial paper (which is unsecured debt issued by credit worthy customers).

Choice 'a' is incorrect. Negotiable CDs have a formal secondary market.

Choice 'b' is incorrect. Negotiable CDs are a product of the banking industry, which is regulated by the Federal Reserve Board.

Choice 'c' is incorrect. Negotiable CDs are usually sold in denominations of a minimum of $100,000.

by Oretha at May 08, 2022, 05:01 PM

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