When a consumer inquires about a current rate on a 1-year certificate of deposit, what must the institution provide?

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When a consumer inquires about a current rate on a 1-year certificate of deposit, the institution must provide the current annual percentage yield (APY). The APY is important because it reflects the interest earned on an account based on the interest rate and the frequency of compounding over one year, allowing consumers to understand the actual return they will receive on their investment. This is a critical disclosure that aligns with regulations designed to keep consumers well-informed and empowered to make financial decisions based on accurate information.

Providing just the current interest rate does not give the consumer the full picture of the potential earnings from the certificate of deposit since it does not account for how interest is compounded. While full account disclosures and current rate sheets can be useful, they are not specifically mandated just for the inquiry about the current rate of a particular product like the 1-year certificate of deposit. Therefore, the most relevant and compliant response to the consumer's inquiry is the current annual percentage yield.

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