Interest, Cost of Money (W!SE Practice Questions)
Terms in this set (19)
To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and the:
The annual percentage rate (APR) is:
The true cost of credit that must be disclosed on a loan agreement
Why might rising interest rates depress stock prices?
Rising interest rates could lower business profits
Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on a loan agreement?
The Truth in Lending Act
Interest earned on interest is known as:
A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that there are:
State Usury Laws. Government regulates the interest rates institutions are allowed to charge.
Who benefits the most from inflation?
Long-term fixed rate borrowers
The cost to use someone else's money for a period of time is called the:
Interest rate-- expressed as a percentage
Money received today is worth more than the same amount of money received in the future is:
Time Value of Money
Which investment would you choose today if you believe interest rates will go up?
Short-term savings instruments (mechanisms)
If a person has $1000 in a savings account and earns $20 a year in interest on that account, the rate of return on the money is close to:
Rate of Return = Amount Earned divided by Initial Investment
Rate of Return = $20 / $1000 = 2%
The time value of money refers to the concept that money:
Received today is worth more than the same amount in the future.
What should a person so when he believes he is being charged too high a rate of interest for a loan by a lending institution?
Notify the lending institution about state usury laws. Usury: Charging excessive interest rates on loans (Prohibited by law).
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:
Long-term, fixed rate certificate of deposit. If you are fixed in at a higher interest rate, when interest rates fall you will still be locked in at the higher rate.
The amount a lender charges to borrow money is called the:
Which type of financial institution usually pays the highest rate of interest on savings account balances?
The information that a lender must disclose to consumers applying for a cash loan is:
Annual Percentage Rate (APR), and/or the finance charge
The "Rule of 72" is an easy way to:
Calculate how fast your savings will double at a given interest rate
When the average prices of goods and services is increasing, the economy is experiencing: