Personal Finance Chapter 3 Lesson 6

What is compound interest?

• Interest paid on interest you've already earned

• Interest paid on the original amount of money invested

• Interest paid on borrowed money

• Interest paid on credit card debt

What happens when you put money into a savings account?

• You earn interest because the bank uses your money for business

• You lose your money due to rules and regulations

• You earn compound growth on your investment

• You pay interest as a fee for using the bank's money

What is the reverse of compound interest?

• Compound growth

• Principal amount

• Borrowing money

• Working against debt

What are the two factors that make compound interest powerful?

• Principal amount and time

• Interest rate and time

• Principal amount and interest rate

• Interest rate and compound growth

What is compound growth?

• Interest earned at a fixed rate

• Interest paid on borrowed money

• Average rate of return on investments

• Average rate of inflation

What is inflation?

• The rise in the price of goods and services over time

• The decrease in the value of money over time

• The increase in interest rates over time

• The decrease in the rate of return on investments

How can you outpace inflation with your investments?

• By having a higher rate of return than the average inflation rate

• By investing in low-risk assets

• By keeping your money in a savings account

• By borrowing money at a low interest rate

What is the time value of money?

• The principle that money today is worth more than the same amount in the future

• The principle that money in the future is worth more than the same amount today

• The principle that money has no value over time

• The principle that money should be invested immediately

What happens to the value of money in the future due to inflation?

• It decreases

• It increases

• It remains the same

• It fluctuates

What is the benefit of investing money today?

• You can earn interest on it and end up with more than you started with

• You can avoid paying interest on borrowed money

• You can protect your money from inflation

• You can increase the value of money in the future