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1.
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.
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.
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.
4.
Interest paid on savings accounts and bonds is generally taxable.
True. Interest paid on savings accounts and bonds is generally taxable.
5.
By investing often while you earn compound interest, you can increase your total return. This is possible because frequent investing increases your _______.
Principal. Frequent investing adds to the size of your principal, thus magnifying your return.