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1.
Which of the following is used in the formula for determining compounded interest?
All of the above. Principal, rate of return, and time periods are used in the compounding formula.
2.
The amount of money you invest is called _______.
Principal. The invested amount of money is called principal.
3.
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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
4.
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.
5.
Interest paid on savings accounts and bonds is generally taxable.
True. Interest paid on savings accounts and bonds is generally taxable.