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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.
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.
3.
Which of the following are not tax-sheltered investments you can use to compound interest?
Municipal bonds. Tax-deferred retirement plans and deferred annuities provide compounding interest, but municipal bonds pay only simple interest. However, you can get the effect of compound interest with a municipal bond fund if you reinvest the dividends.
4.
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.
5.
The amount of money you invest is called _______.
Principal. The invested amount of money is called principal.