Which financial instrument pays interest on a lump sum of money?

A Certificate of Deposit (CD) is a financial instrument that pays interest on a lump sum of money deposited for a fixed period of time. When individuals invest in a CD, they agree to leave their money in the bank for a specified duration, which can range from a few weeks to several years. In return, the bank provides a higher interest rate compared to regular savings accounts. The interest is typically paid at the end of the term or at regular intervals, depending on the terms agreed upon when the CD is purchased.

This instrument is considered low-risk and is often used by individuals who want a predictable return on their savings. Unlike other options such as Common Stock, which represents ownership in a company and may not provide regular income, or Mutual Funds, which pool investments and may or may not yield regular interest payments, a CD guarantees a return based on the interest rate set at the time of investment. Additionally, Corporate Bonds represent a loan to a corporation, which pays periodic interest, but they do not involve a lump sum deposit in the same sense as a CD since they are securities tied to the performance of the issuing company. Thus, the Certificate of Deposit stands out as the correct financial instrument that directly pays interest on a lump sum of money deposited