PBMF Interest Test

When April was born, her parents placed $500 in a savings account to give to her on her 18th birthday. The interest rate on the account is one percent and it is a simple interest account. How much will April have in the account on her 18th birthday?

$590

If the annual interest rate is 24 percent, what is the monthly interest rate?

2 percent

If Rick places $1,000 into a savings account which earns nine percent, it will take approximately how many years to turn the $1,000 investment into $2,000?

8 years

What is interest?

A fee paid for the use of money

Which of the following are ways to earn interest?

All of the above; Banks Savings Account, Government Bonds, Money Market funds

How is interest usually expressed?

As a percentage

5 different types of bank accounts that you can earn interest from

Bank Savings Account Money Market Deposits Certificate of Deposit Account Government Bonds Checking Accounts/Stock Market

How are government bonds obtained?

By loaning money to the government

Interest Rates

Can be affected by the amount of money in an account May be affected by the overall health of the economy Can fluctuate with the projected stability of stock markets Can also be determined by the length of time an investor has had an account at a bank or financial institution - the larger the better

Which is NOT a type of interest?

Complex

When did England begin using interest as we know it today?

During the 18th Century

The Federal Trade Commission is the agency regulating financial institutions and managing the nation's money

False

What is the formula for simple interest?

I = P x R x T

What does the P stand for in the simple interest formula?

Principal

Which of the following is the term for the amount invested?

Principal

Which of the following is NOT a way market interest rates affect the U.S. economy?

Regulation

The amount earned on an investment is known as which of the following?

Return

Where money is placed should be based on the amount of __________ an individual is willing to take and the amount of __________ they wish to receive.

Risk; Return

Which is more powerful, simple interest or compound interest?

Simple Interest

What is the central banking system of the United States?

The Federal Reserve

The formula for estimating how long it will take for an investor to double his/her money is known as which of the following?

The Rule Of 72

Which of the following is NOT a reason lenders charge interest on loans?

To pay for federal lenders' fees

Compound interest involves earning interest on principal and on interest previously earned.

True

Interest rates for loans are sometimes negotiable.

True

The amount earned on simple interest grows much faster than the amount earned on compound interest.

True

The early Christian church forbid using interest

True

The rule of 72 is a rough estimation of how long it will take an investor to __________ their money.

double