Personal Finance EF Module 1

Interest is:

• a charge for lending money to a bank

• the amount owed for borrowing money

• the amount added into your savings when opening a bank account

• a charge for the convenience of accessing money stored in your bank account

Anthony is deciding between different savings accounts at his bank. He has four options, based on how frequently interest compounds. Which should he choose if he wants the best rate of return on his interest?

• Annual Compounding

• Semi-Annual Compounding

• Monthly Compounding

• Daily Compounding

To earn as much interest as possible, you should open a savings account that earns _______ interest and has the ______ interest rate.

• compound; lowest

• compound; highest

• simple; lowest

• simple; highest

What is the typical relationship between time and interest rate?

• Longer time period usually equals higher interest rates.

• Shorter time period usually equals higher interest rates.

• Longer time periods usually have no effect on interest rates.

• Shorter time periods usually have no effect on interest rates.

John just opened a savings account and wants to maximize the amount of interest he earns. Which of the following actions would enable him to earn MORE interest?

• Selecting an account with a high interest rate.

• Leaving his money in the account for long period of time.

• Transferring money into his checking account each month

• Both A & B

Tamara has $500 she is looking to save for a class trip. She wants to earn the most possible interest and will not need access to her money for a full year. Which type of savings account will be best for Tamara?

• Certificate of Deposit (CD

• Money Market Account

• Savings Account

• Checking Account

You are opening a savings account that earns compound interest. Which compounding frequency will earn you the MOST money

• Compounding 1 time a year

• Compounding 4 times a year

• Compounding monthly

• Compounding daily

Which of the following is considered a "need"?

• Food

• Pizza

• Gatorade

• Fruit

Which of the following is a type of savings vehicle?

• Certificate of Deposit

• Money Market Account

• Checking Account

• Both A & B

Which type of account typically has very high liquidity, low or no interest, and low minimum balance

• Checking Account

• Money Market Account

• Certificate of Deposit (CD)

• Investment Retirement Account (IRA)