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
