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1. What is compound interest?
A
Interest earned only on the principal.
B
Interest earned on the principal and previously earned interest.
C
A fee charged for borrowing money.
2. How does compound interest grow over time?
A
It decreases over time.
B
It remains constant.
C
It adds up as interest is calculated on interest.
3. Why is compound interest beneficial for savings?
A
It has no effect on savings.
B
It allows your money to grow faster over time.
C
It reduces the amount saved.
4. What is the interest rate if an investor wants to double their money in 6 years?
A
10%
B
12%
C
8%
5. Using the rule of 72, what is the doubling time for a 4% interest rate?
A
18 years
B
24 years
C
12 years
6. If you want to double your investment in 10 years, what interest rate do you need?
A
7.2%
B
8%
C
6%
7. If you have an investment with a 9-year doubling time, what is the interest rate?
A
9%
B
8%
C
7%
8. What is the Rule of 72 used for?
A
Estimating the time to double an investment.
B
Determining stock prices.
C
Calculating interest rates.
9. What is the formula for the Rule of 72?
A
72 minus the annual interest rate.
B
72 multiplied by the annual interest rate.
C
72 divided by the annual interest rate.
10. What type of interest does the Rule of 72 primarily apply to?
A
Fixed interest.
B
Compound interest.
C
Simple interest.
11. What is the main benefit of using the Rule of 72?
A
Calculating taxes owed.
B
Quickly estimating investment growth.
C
Determining loan payments.
12. What does the Rule of 72 estimate?
A
The total investment amount.
B
The time to double an investment.
C
The interest rate needed.
13. If an investment has a 6% return, how long to double?
A
15 years.
B
10 years.
C
12 years.
14. What interest rate gives a doubling time of 9 years using the Rule of 72?
A
6%.
B
10%.
C
8%.
15. Who gets credit for inventing the Rule of 72?
A
Albert Einstein
B
Dave Ramsey
C
Susie Orman
16. Why is calculating the time value of money important?
A
It determines the best savings account.
B
It helps in budgeting monthly expenses.
C
It allows comparison of future money value with present money value.
17. What does inflation indicate?
A
A temporary rise in stock prices.
B
A sustained increase in the general price level of goods and services.
C
A decrease in the value of currency.
18. How does inflation affect the time value of money?
A
It increases the value of future investments.
B
It has no effect on money value.
C
It decreases the purchasing power of future money.
19. Which of the following is a factor in calculating the time value of money?
A
Tax rates.
B
Interest rates.
C
Employment rates.
20. What is the primary purpose of understanding the time value of money?
A
To predict stock market trends.
B
To calculate monthly expenses.
C
To make informed financial decisions.
21. What happens to money's value over time due to inflation?
A
It remains the same.
B
It increases significantly.
C
It generally decreases.