Interest Question Preview (ID: 33602)
WISE Test Review Questions.
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To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and
a) her total income
b) the rate of inflation
c) whether the account is FDIC protected
d) whether the bank offers overdraft protection.
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) 2%
c) 10%
d) 20%
Money recieved today is worth more than the same amount of money received sometime in the future is
a) the Rule of 72
b) the time value of money
c) not true
d) investing
The Rule of 72 is an easy way to
a) approximate your savings balance each year
b) calculate how fast your savings will double in value at given interest rates
c) calculate how much tax you will owe on the interest earned
d) calculate the length of time it takes to pay off a credit balance
Why might rising interest rates depress stock prices?
a) Stock investors are lured away from interest-paying investments to stocks.
b) Rising interest rates can result in lower business profits.
c) Rising interest rates usually means the economy has less.
d) Rising interest rates can result in higher business profits.
The amount a lender charges to borrow money is
a) principal
b) Annual Percentage Rate (APR)
c) Loan Balance
d) Finance charge
Which type of financial institution usually pays the highest rate of interest on savings account balances?
a) savings and loan associations
b) commercial banks
c) credit unions
d) investment firm money market accounts
The time value of money refers to the concept that money:
a) received today is worth more than the same amount of money received in the future.
b) changes in value along with interest rates
c) money will double in value over seven years
d) is the foundation for developing a financial plan
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) nothing, she should put money under her mattress
b) a variable rate certificate of deposit
c) a long-term, fixed rate certificate of deposit
d) a short-term, fixed rate certificate of deposit
What should a person do when he believes he is being charged too high a rate of interest for a loan by a lending insitution?
a) Accept the loan but pay it off early.
b) Ask the lending institution to lower its rates.
c) Notify the lending institution about state usury laws.
d) Notify the local Better Business Bureau.
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