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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.
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.
3.
The _______ you invest your money, the _______ compounding can work for you.
Earlier / More. Compounding expands your money greatly over time.
4.
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.
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.