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Stocks 102: Make Compound Interest Work for You

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1.
Interest paid on savings accounts and bonds is generally taxable.
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True. Interest paid on savings accounts and bonds is generally taxable.
2.
A tax-sheltered account always protects your investment interest from taxes, even when you withdraw from it.
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False. A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
3.
The _______ you invest your money, the _______ compounding can work for you.
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Earlier / More. Compounding expands your money greatly over time.
4.
Which of the following is used in the formula for determining compounded interest?
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All of the above. Principal, rate of return, and time periods are used in the compounding formula.
5.
The longer an investment is allowed to compound interest, the higher its return will be.
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True. Although time wont affect the actual rate of return, the return itself will grow, and it will grow much larger than it would from simple interest.