Calculations/Financial Literacy

What is the main benefit of investing small amounts of money regularly over time?

• It decreases the risk of losing money.

• It allows the money to grow through compound interest.

• It guarantees a fixed return.

• It avoids the need for a financial advisor.

Which of the following best describes compound interest?

• Interest calculated only on the initial principal.

• Interest calculated on both the initial principal and the accumulated interest.

• Interest that decreases over time.

• Interest that remains constant regardless of the principal.

If you invest $100 at a simple interest rate of 5% per year, how much interest will you earn after 3 years?

• $5

• $10

• $15

• $20

Calculate the compound interest on $200 invested at an annual interest rate of 4% for 2 years.

• $8.16

• $16.32

• $16.00

• $8.00

What is the estimated cost of a two-year college education if the annual cost is $10,000?

• $15,000

• $20,000

• $25,000

• $30,000

If a family plans to save for a four-year college education costing $40,000 per year, how much should they save annually to cover the first year, assuming they start saving 5 years in advance?

• $8,000

• $10,000

• $12,000

• $16,000

Which of the following is a key advantage of starting to save for retirement early?

• It reduces the need for budgeting.

• It allows more time for compound interest to grow the savings.

• It eliminates the need for other investments.

• It guarantees a higher salary in the future.

If you save $50 every month for 10 years in an account that earns 3% annual interest compounded monthly, approximately how much will you have at the end of 10 years?

• $6,000

• $6,500

• $7,000

• $7,200

What is the formula for calculating simple interest?

If a student wants to save $5,000 for college in 3 years, how much should they save each month assuming no interest is earned?

• $100

• $120

• $138.89

• $150