If the interest rate on Ed's checking account is 0.50 percent and the interest rate on the certificate of deposit (CD) that he is considering is 3 percent, then the opportunity cost of holding money is 3 percent.
An interest-earning savings product known as a certificate of deposit (CD) is one that pays interest on a lump sum for a predetermined amount of time. Savings accounts and CDs are different in that the money in a CD must be kept in it for the duration of the term to avoid penalties and interest loss. As compensation for the loss of liquidity, CDs often provide higher interest rates than savings accounts.
Nearly all consumer financial institutions provide certificates of deposit (CDs), although it is up to each bank to decide whose conditions it wishes to give, how much higher the rate will be compared to the bank's savings and money market products, and what penalties it applies for early withdrawal.
To know more about Certificate of deposit visit:
https://brainly.com/question/28024749
#SPJ4
