Personal Finance Lesson 4 Test Prep

An investment that earns interest on the principal amount invested, and earns interest on the interest that is earned along the way, is earning:

• amortization

• simple interest

• dividends

• compound interest

that an amount of money is worth more today than the same amount of money is worth in the future, is called:

• compound interest

• rate of return

• time value of money

• present value

In order for an investment to produce a positive result, then the rate of return needs to be:

• higher than the rate of inflation

• a nominal return

• invested over a five year period

• higher than 3.5%

What is the present value given the following variables: Future Value (or FV) = $115, Rate of Return (or ROR) = 5%, and Number of Periods (N) = 3 years:

• $100

• $99.34

• $99.20

• $90.11

The increase in prices over a specific period of time, usually shown as a percentage, is called:

• rate of return

• compound interest

• dividends

• inflation

What is the present value given the following variables: Future Value (or FV) = $125, Rate of Return (or ROR) = 6%, and Number of Periods (N) = 4 years:

• $125

• $98.79

• $99.01

• $90.11

What is the present value given the following variables: Future Value (or FV) = $112, Rate of Return (or ROR) = 4%, and Number of Periods (N) = 6 years:

• $88.52

• $100.00

• $88.71

• $99.01

Interest that accumulates on the principal and the accrued interest.

• Future Value

• Compound Interest

• Future Value

• Inflation

The increase in prices over a specific period of time, usually shown as a percentage.

• Inflation

• Interest Rate

• Present Value

• Rate of Return

The percentage of principal charged by the lender for loaning money.

• Simple Interest

• Time Value of Money

• Interest Rate

• Rate of Return (ROR)