Basics Beginner: Make Compound Interest Work for You

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1.
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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
2.
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.
3.
To find out the rate of interest that you would need to double your investment in a certain number of years, _______.
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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.
The amount of money you invest is called _______.
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Principal. The invested amount of money is called principal.
5.
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.