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Wise Interest,and Cost Of Money
Test Description: Wise test
Instructions: Answer all questions to get your test result.
1) To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and
A
To determine the time value of depositing $100 in a savings account, a person needs to know the inte
B
whether the account is FDIC protected.
C
whether the bank offers overdraft protection.
D
the rate of inflation.
2) The amount a lender charges to borrow money is called the:
A
Principal
B
Opportunity cost
C
Finance charge
D
Minimum payment
3) Interest earned on interest is known as:
A
Compounded interest
B
Variable interest
C
Simple interest
D
True interest
4) 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:
A
A short-term, fixed rate certificate of deposit
B
A variable rate certificate of deposit
C
Nothing, she should put her money under her mattress
D
A long-term, fixed rate certificate of deposit
5) Which type of financial institution usually pays the highest rate of interest on savings account balances?
A
Investment firm money market accounts
B
Savings and loan associations
C
Credit unions
D
Commercial banks
6) 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?
A
Notify the lending institution about state usury laws.
B
Accept the loan but pay it off early.
C
Ask the lending institution to lower its rates.
D
Notify the local Better Business Bureau.
7) The information that a lender must disclose to consumers applying for a cash loan is
A
Full dollar amount being paid back on the loan over its life
B
The annual percentage rate (APR), and/or the finance charge
C
The tax obligations
D
The formula for compounded interest
8) Money received today is worth more than the same amount of money received sometime in the future is:
A
Investing
B
The time value of money
C
Not true
D
The Rule of 72
9) If a person has $1,000 in a savings account and earns $20 a year in interest on that account, the rate of return on the money is close to
A
5%.
B
10%
C
2%
D
20%
10) The cost to use someone else's money for a period of time is called the:
A
Inflation rate
B
Interest rate expressed as a percentage
C
Opportunity cost
D
Minimum payment
11) The Rule of 72 is an easy way to:
A
Calculate how fast your savings will double in value at given interest rates
B
Approximate your savings balance each year
C
Calculate the length of time it takes to pay off a credit balance
D
Calculate how much tax you will owe on the interest earned
*select an answer for all questions
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