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1.
Compound interest is _______.
Interest paid on both interest earned and principal. Because of the way compound interest works, your earnings grow faster than they would by simple interest alone.
2.
To find out the rate of interest that you would need to double your investment in a certain number of years, _______.
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.
3.
Reinvesting your dividends helps you compound your earnings because it _______.
Builds your investment base. The larger your investment base, the more there is to compound.
4.
A tax-sheltered account always protects your investment interest from taxes, even when you withdraw from it.
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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
5.
By investing often while you earn compound interest, you can increase your total return. This is possible because frequent investing increases your _______.
Principal. Frequent investing adds to the size of your principal, thus magnifying your return.