Which statement about money market deposit accounts compared to savings accounts is true?

Which statement about money market deposit accounts compared to savings accounts is true?

• A. They are insured separately from standard savings accounts
• B. They require no minimum balances
• C. They have lower liquidity than savings accounts
• D. They generally pay higher interest rates than savings accounts

Answer: (D)

The key idea is how yields compare between money market deposit accounts and savings accounts and how their features affect value. Money market accounts are designed to attract larger balances, often by offering higher, tiered interest rates. This means that, in many cases, the money you keep in a money market account earns more interest than in a plain savings account, especially if you maintain a higher balance to reach better rate tiers. Both types of accounts are insured by the same government agency up to the applicable limits, so insurance protection isn’t what differentiates them. Money market accounts also tend to have some access features like check writing, but these can come with restrictions that affect liquidity. Because of the potential for higher yields with larger balances and tiered rates, the statement that money market accounts generally pay higher interest rates than savings accounts is the best choice.