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1.
The longer an investment is allowed to compound interest, the higher its return will be.
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.
2.
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.
3.
The _______ you invest your money, the _______ compounding can work for you.
Earlier / More. Compounding expands your money greatly over time.
4.
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.
5.
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.