Unit 5 Review: Investing and Compounding

Please label each part of the function with the appropriate description.

b

c

d

e

a

time (in years)

compounding period

interest rate

initial balance

ending balance

Please label each part of the function with the appropriate descricription.

a

b

c

d

final value

growth/decay factor

initial value

time

Match each formula with its appropriate title.

• Compound Interest

• 
• Future Value of Periodic Deposit

• 
• Continuous Compounding Interest

• 
• Simple Interest

• 
• Annual Percentage Yield

• 

When price levels increase, purchasing power

• increases

• decreases

• stays the same

• doubles

Tags

CCSS.6.EE.B.7

What is the benefit of starting to invest early, even with a small amount?

• Your investments are likely to grow more since compounding means returns get larger over time

• You are guaranteed higher returns since compounding reduces the risks of investing

• You can use your investments to meet short-term financial goals since you don't need to hold them as long

• You can take advantage of brokerage discounts for long-term investors

All of the following are reasons to invest, EXCEPT...

• To minimize the impact on inflation, which causes you to lose purchasing power

• To earn a consistent rate of return with lower risk than typical savings accounts

• To build wealth by reinvesting your returns and allowing them to compound

• To earn higher average rates of return than you would in a typical savings account

In addition to the price of goods and services, what else is impacted by inflation? Select ALL that apply.

• Debts

• Wages

• Savings

• Date

• Interest

Tags

CCSS.7.RP.A.3

Which of the following is TRUE about investing?

• It is meant for short-term needs like your emergency fund, not saving for retirement

• It guarantees a high rate of return over a short period of time

• It can help you grow your money through the power of compounding

• It involves little risk because your returns are insured up to $250,000

Trevor has saved $500 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

• His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation

• His purchasing power will INCREASE because the interest rate is higher than the historical rate of inflation

• His purchasing power will INCREASE because the interest will compound faster than the historical rate of inflation

• His purchasing power will remain the SAME because the interest rate is the same as the historical rate of inflation

For each of the following, identify whether it describes savings or investing. Then drag the feature to the appropriate category.

Groups:

(a) Savings

,

(b) Investing

• long-term goals

• short-term goals

• cash, money market accounts

• loses value w/inflation

• saving for retirement

• lower financial risk

• saving for emergency fund

• likely to beat inflation over time

• stocks, bonds & real estate

• higher financial risk