Multiple choice

Which of the following is not a characteristic of company fixed deposits?

  1. A higher rate of interest

  2. Higher risk

  3. Unfavourable effect of tax

  4. Very high liquidity
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Company fixed deposits typically offer higher interest rates than bank deposits (compensating for higher risk), carry higher risk of default, and have unfavorable tax treatment (interest is fully taxable). However, they do NOT offer very high liquidity - they have fixed tenure and premature withdrawal often involves penalties or may not be permitted. This lack of liquidity is a key disadvantage compared to bank deposits.

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