Wise Interest,and Cost Of Money Question Preview (ID: 13889)


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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) To determine the time value of depositing $100 in a savings account, a person needs to know the inte
b) whether the bank offers overdraft protection.
c) whether the account is FDIC protected.
d) the rate of inflation.

The amount a lender charges to borrow money is called the:
a) Principal
b) Finance charge
c) Minimum payment
d) Opportunity cost

Interest earned on interest is known as:
a) Simple interest
b) Variable interest
c) Compounded interest
d) True interest

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 her money under her mattress
b) A short-term, fixed rate certificate of deposit
c) A long-term, fixed rate certificate of deposit
d) A variable rate certificate of deposit

Which type of financial institution usually pays the highest rate of interest on savings account balances?
a) Savings and loan associations
b) Investment firm money market accounts
c) Credit unions
d) Commercial banks

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) Accept the loan but pay it off early.
b) Notify the local Better Business Bureau.
c) Notify the lending institution about state usury laws.
d) Ask the lending institution to lower its rates.

The information that a lender must disclose to consumers applying for a cash loan is
a) The formula for compounded interest
b) The tax obligations
c) Full dollar amount being paid back on the loan over its life
d) The annual percentage rate (APR), and/or the finance charge

Money received today is worth more than the same amount of money received sometime in the future is:
a) The Rule of 72
b) Investing
c) Not true
d) The time value of money

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) 20%
c) 10%
d) 2%

The cost to use someone else's money for a period of time is called the:
a) Interest rate expressed as a percentage
b) Opportunity cost
c) Minimum payment
d) Inflation rate

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

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