Future Business Leaders of America (FBLA) Securities and Investments Practice Test

Negotiate CDs are characterized by which of the following?

1. Small-denominated certificates of deposit

2. Large-denominated certificates of deposit

3. Loans secured by property

4. Stocks traded on the NYSE

The correct answer is: Large-denominated certificates of deposit

Negotiable CDs, or Certificates of Deposit, are primarily characterized by being large-denominated instruments. They are issued in large amounts, typically over $100,000, and can be bought and sold in the secondary market, making them “negotiable.” This means they can be transferred from one party to another before maturity, allowing for greater liquidity compared to regular CDs, which are often smaller in denomination and cannot be easily traded. The large denomination is an important feature because it typically appeals to institutional investors rather than individual ones. These CDs are also subject to different regulatory requirements and criteria compared to smaller, non-negotiable CDs. Additionally, negotiable CDs usually offer higher interest rates than traditional savings accounts or smaller, non-negotiable CDs due to the higher minimum investment and the nuanced risk involved with large-denomination investments. Other options do not accurately describe negotiable CDs. Certificates of deposit, in general, are not typically associated with being loans secured by property, nor are they stocks traded on the NYSE, both of which pertain to entirely different financial instruments. Smaller-denominated certificates of deposit also lack the trading characteristic that defines negotiable CDs.