Which statement correctly describes money market deposits compared with bank deposit accounts?

Which statement correctly describes money market deposits compared with bank deposit accounts?

• A. Bank deposit accounts offer instant access with low returns.
• B. Money market deposits offer higher returns but funds must remain until maturity.
• C. Bank deposit accounts require funds to be locked until maturity.
• D. Money market deposits are instantly accessible.

Answer: (B)

Money market deposits typically pay higher interest than ordinary bank deposit accounts because you accept some restriction on how quickly you can withdraw the funds. The main trade-off is liquidity versus yield: you get a higher return by leaving the money deposited until a set maturity or for a certain term, rather than having instant access. That’s why the statement that money market deposits offer higher returns but funds must remain until maturity best describes how they compare with standard bank deposits. The other options either imply instant access or locking funds in conditions that aren’t generally accurate for bank deposits or money market deposits.

Money market deposits typically pay higher interest than ordinary bank deposit accounts because you accept some restriction on how quickly you can withdraw the funds. The main trade-off is liquidity versus yield: you get a higher return by leaving the money deposited until a set maturity or for a certain term, rather than having instant access. That’s why the statement that money market deposits offer higher returns but funds must remain until maturity best describes how they compare with standard bank deposits. The other options either imply instant access or locking funds in conditions that aren’t generally accurate for bank deposits or money market deposits.