5
QuizMultiple Choice

Fixed Investments — Quiz

Question 5 • Financial Math

An account offers a guaranteed 3% interest rate, with interest compounded annually, and the principal amount can be withdrawn after 5 years. Is this a fixed investment?

Answer
A
No, because it allows early withdrawal.
B
No, because the interest is compounded annually.
C
Yes, because it is a savings account.
D
Yes, because it offers a guaranteed interest rate and principal repayment at a specified time.

Explanation

A fixed investment has a guaranteed return and returns the principal at a specified time. Here, the account guarantees 3% annual interest and allows the principal to be withdrawn after 5 years, so it fits that description. Annual compounding does not make it non-fixed, and the fact that it is a savings account is not the deciding factor.

AI-written and checked against the verified answer.

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