Understanding Interest Rates

The video tutorial explains the concept of interest, likening it to rent on money. It details how interest is calculated as a percentage of the money in a bank account and provides an example with a 10% interest rate. The tutorial also highlights that interest rates fluctuate daily due to economic conditions.

How is interest similar to paying rent?

• Interest is a penalty for late payments.

• Interest is a type of tax.

• Interest is a reward for saving money.

• Interest is a fee for using someone else's money.

What is the interest earned on $100 at a 10% interest rate after one year?

• $20

• $15

• $10

• $5

How is the interest rate determined?

• It changes based on the economy and other factors.

• It is chosen by the account holder.

• It is set by the government.

• It is fixed by the bank.

What happens to the interest rate if the economy changes?

• It always decreases.

• It remains the same.

• It can increase or decrease.

• It always increases.

Why might the interest rate not always be 10%?

• Because it is influenced by daily economic changes.

• Because it is determined by the account holder.

• Because banks prefer lower rates.

• Because it is a fixed rate.