By increasing the interest rate, the Federal Reserve

Discourages spending or borrowing to influence the rate of inflation.

Which investment scenario yields the highest return over 5 years?

$1,000 invested at 5% compound interest annually.

Which of the following is an example of the Rule of 72?

A person invests $1,000 at a rate of 9%. After 8 years the value is $2,000.

Which of the following statements illustrates the concept of the time value of money?

The earlier you start saving for retirement, the more your money will grow.

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W!se Practice Questions - Cost of Money

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Practice questions for the W!se Financial Literacy Test organized by Test Blueprint.

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Questions 7

Answers

1
By increasing the interest rate, the Federal Reserve
Discourages spending or borrowing to influence the rate of inflation.
Promotes international trade.
Strives to increase the rate of employment.
Encourages spending or borrowing to influence the rate of inflation.
2
This agency seeks to control inflation by influencing interest rates.
Financial Industry Regulatory Authority (FINRA).
Federal Deposit Insurance Corp. (FDIC).
Security and Exchange Commission (SEC).
Federal Reserve System (Fed).
3
Which investment scenario yields the highest return over 5 years?
$1,000 invested at 5% simple interest annually.
$1,000 invested at 4% simple interest annually.
$1,000 invested at 4% compound interest annually.
$1,000 invested at 5% compound interest annually.
4
If an investment of $1,000 grows at a rate of 6% per year, how long will it take for a person to double this investment?
24 years
18 years
6 years
12 years
5
Which of the following is an example of the Rule of 72?
A person invests $1,000 at a rate of 9%. After 8 years the value is $2,000.
The maximum repayment for a loan on a vehicle may not exceed 72 months
A person takes out a loan of $1,000 with an APR of 6% over 72 months.
In a normal inflation rate, the cost of goods will double every 72 months
6
Which of the following methods will calculate the highest interest payment?
Interest compounded monthly.
Interest compounded daily.
Simple interest.
Interest compounded annually.
7
Which of the following statements illustrates the concept of the time value of money?
The earlier you start saving for retirement, the more your money will grow.
Keeping your money under your mattress is the safest way to keep its value.
Investing in stocks always guarantees a higher return compared to bonds
Borrowing money at a high interest rate is better than a low interest rate.

W!se Practice Questions - Cost of Money Flashcards | StudBud