Test your knowledge

Choose wisely. There is only one correct answer to each question.

Keep studying!

Review your answers below to learn more.

Reinvesting your dividends helps you compound your earnings because it _______.

Choose wisely. There is only one correct answer.

Builds your investment base

Increases your dividend rate

Lowers risk

Builds your investment base. The larger your investment base, the more there is to compound.

To find out the rate of interest that you would need to double your investment in a certain number of years, _______.

Choose wisely. There is only one correct answer.

Divide 72 by the number of years

Divide the number of years by 72

Neither of the above

Divide 72 by the number of years. To find out the rate of interest you will need to double your investment in a certain amount of years, divide 72 by the number of years.

Which of the following is used in the formula for determining compounded interest?

Choose wisely. There is only one correct answer.

Principal

Rate of return (interest)

Time periods

All of the above

All of the above. Principal, rate of return, and time periods are used in the compounding formula.

The amount of money you invest is called _______.

Choose wisely. There is only one correct answer.

Simple interest

Compound interest

Principal

Principal. The invested amount of money is called principal.

Interest paid on savings accounts and bonds is generally taxable.

Choose wisely. There is only one correct answer.

True

False

True. Interest paid on savings accounts and bonds is generally taxable.

© Copyright 2024 Morningstar, Inc. All rights reserved. Morningstar, the Morningstar logo, Morningstar.com, Morningstar Tools are either trademark or service marks of Morningstar, Inc. In addition, we encourage you to read this important disclosure.