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Investing Basics Beginner: Make Compound Interest Work for You

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1.
Compound interest is _______.
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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.
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.
3.
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.
4.
The _______ you invest your money, the _______ compounding can work for you.
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Earlier / More. Compounding expands your money greatly over time.
5.
The Rule of 72 states that if you divide 72 by a given interest rate, you will learn how many years it will take for an investment to double. How long would it take for an investment with an interest rate of 4% to double?
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18 years. Dividing 72 by 4 gives you 18.