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Investing Basics Beginner: Make Compound Interest Work for You

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1.
The _______ you invest your money, the _______ compounding can work for you.
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Earlier / More. Compounding expands your money greatly over time.
2.
Which of the following is used in the formula for determining compounded interest?
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All of the above. Principal, rate of return, and time periods are used in the compounding formula.
3.
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.
4.
A tax-sheltered account always protects your investment interest from taxes, even when you withdraw from it.
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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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
5.
Reinvesting your dividends helps you compound your earnings because it _______.
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Builds your investment base. The larger your investment base, the more there is to compound.