Exploring Simple vs. Compound Interest

The video tutorial explains the concept of interest, focusing on simple and compound interest. It discusses how interest can be earned on savings and investments, and how it is paid when borrowing money. The tutorial highlights the power of compound interest in growing wealth over time and provides examples to illustrate the differences between simple and compound interest. It also covers the implications of interest on credit card debt and offers advice on responsible borrowing and investing.

What is the primary way to earn interest?

• By borrowing money

• By using a credit card

• By investing in stocks

• By keeping money in a savings account or investment

What type of interest is earned on both the initial deposit and previously earned interest?

• Fixed interest

• Compound interest

• Annual interest

• Simple interest

How often can compound interest be added to an account?

• Weekly

• Monthly

• Annually

• All of the above

What is the effect of compound interest over a long period?

• Has no effect on the total amount

• Keeps the total amount the same

• Decreases the total amount

• Significantly increases the total amount

What is a riskier investment option mentioned in the video?

• Stock market

• Savings account

• Simple interest account

• Certificate of Deposit (CD)

At what age can teens start investing in the stock market according to the video?

• Only with a parent or guardian

• After finishing high school

• After 18 years old

• At any age with proper guidance

What should you compare when choosing where to invest your money?

• The reputation of the bank only

• Fees and minimum balances only

• Interest rates only

• Interest rates, fees, and minimum balances

What is the average credit card interest rate mentioned?

• 25%

• 17%

• 10%

• 5%

How much extra in interest would you pay on a $2,000 credit card debt with only $75 monthly payments?

• $750

• $529

• $300

• $1,000

What is the key to using a credit card responsibly?

• Paying the minimum balance each month

• Using it for emergencies only

• Paying off the balance in full every month

• Using it frequently for small purchases