Basics Beginner: Make Compound Interest Work for You

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
The _______ you invest your money, the _______ compounding can work for you.
Choose wisely. There is only one correct answer.
Earlier / More. Compounding expands your money greatly over time.
2.
A tax-sheltered account always protects your investment interest from taxes, even when you withdraw from it.
Choose wisely. There is only one correct answer.
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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
3.
By investing often while you earn compound interest, you can increase your total return. This is possible because frequent investing increases your _______.
Choose wisely. There is only one correct answer.
Principal. Frequent investing adds to the size of your principal, thus magnifying your return.
4.
The amount of money you invest is called _______.
Choose wisely. There is only one correct answer.
Principal. The invested amount of money is called principal.
5.
To find out the rate of interest that you would need to double your investment in a certain number of years, _______.
Choose wisely. There is only one correct answer.
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.