Basics Beginner: Make Compound Interest Work for You

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1.
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.
2.
The Rule of 72 states that if you divide 72 by a given interest rate, you will learn how many years it will take for an investment to double. How long would it take for an investment with an interest rate of 4% to double?
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18 years. Dividing 72 by 4 gives you 18.
3.
By investing often while you earn compound interest, you can increase your total return. This is possible because frequent investing increases your _______.
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Principal. Frequent investing adds to the size of your principal, thus magnifying your return.
4.
Interest paid on savings accounts and bonds is generally taxable.
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True. Interest paid on savings accounts and bonds is generally taxable.
5.
The amount of money you invest is called _______.
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Principal. The invested amount of money is called principal.