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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
the rate of inflation.
B
whether the account is FDIC protected.
C
To determine the time value of depositing $100 in a savings account, a person needs to know the inte
D
whether the bank offers overdraft protection.
2) The amount a lender charges to borrow money is called the:
A
Finance charge
B
Principal
C
Opportunity cost
D
Minimum payment
3) Interest earned on interest is known as:
A
Variable interest
B
Simple interest
C
Compounded 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
Nothing, she should put her money under her mattress
C
A variable rate certificate of deposit
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
Credit unions
B
Savings and loan associations
C
Commercial banks
D
Investment firm money market accounts
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 local Better Business Bureau.
B
Accept the loan but pay it off early.
C
Notify the lending institution about state usury laws.
D
Ask the lending institution to lower its rates.
7) The information that a lender must disclose to consumers applying for a cash loan is
A
The annual percentage rate (APR), and/or the finance charge
B
The formula for compounded interest
C
The tax obligations
D
Full dollar amount being paid back on the loan over its life
8) Money received today is worth more than the same amount of money received sometime in the future is:
A
The Rule of 72
B
Not true
C
The time value of money
D
Investing
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
Interest rate expressed as a percentage
B
Minimum payment
C
Inflation rate
D
Opportunity cost
11) 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
*select an answer for all questions
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