MoneyPower: Interest, Cost of Money (10 Questions)

To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and

• her total income.

• the rate of inflation.

• whether the account is FDIC protected.

• whether the bank offers overdraft protection.

What should a person do when he believes he is being charged too high a rate of interest for a loan by a lending institution?

• Accept the loan but pay it off early.

• Ask the lending institution to lower its rates.

• Notify the lending institution about state usury laws.

• Notify the local Better Business Bureau.

Who benefits the most from inflation?

• Long-term fixed rate borrowers

• Lenders

• Persons on fixed incomes

• The government

The amount a lender charges to borrow money is called the:

• Principal

• Annual Percentage Rate (APR)

• Loan balance

• Finance charge

Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement?

• Fair Credit Reporting Act

• Equal Credit Opportunity Act

• Truth in Lending Act

• Fair Debt Collection Practices Act

Money received today is worth more than the same amount of money received sometime in the future is:

• The Rule of 72

• The time value of money

The cost to use someone else's money for a period of time is called the:

• Interest rate expressed as a percentage

• Opportunity cost

• Minimum payment

• Inflation rate

The annual percentage rate (APR) is:

• The true cost of credit that must be disclosed on a loan agreement

• Always expressed in dollars

• Required by the Securities Exchange Commission

• Required by the Comptroller of the Currency

Why might rising interest rates depress stock prices?

• Stock investors are lured away from interest-paying investments to stocks

• Rising interest rates can result in lower business profits

• Rising interest rates usually means the economy has less

• Rising interest rates can result in higher business profits

Lamar believes that interest rates are going to fall in the near future and remain low for a considerable period of time. She should invest in:

• Nothing, she should put her money under her mattress

• A variable rate certificate of deposit

• A long-term, fixed rate certificate of deposit

• A short-term, fixed rate certificate of deposit