Finance Fridays
Finance Fridays is a publication of the NC Department of State Treasurer. Treasurer Brad Briner is focused on preserving, protecting, and sustaining the state’s pension and healthcare plans. Briner was most recently the Co-Chief Investment Officer for Willett Advisors and has held positions at Morgan Creek Capital, the UNC Management Company, ArcLight Capital, and Goldman Sachs.
Issue 03: June 6, 2025
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Test Your Knowledge: Questions and Answers:
For Teens:
What is the difference between compound interest and interest rate?
- A. Compound interest is the percentage charged on a loan, while interest rate is the money earned on savings.
- B. Interest rate alone determines how much compound interest will grow, while compound interest is calculated only on the original principal.
- C. Compound interest refers to the total interest on the principal and previous interest, while interest rate is the percentage used to calculate interest on a loan or investment.
The answer is C.
A person deposits $5,000 in a bank account, which pays 6% simple interest per year. Find the value of his deposit after four years.
- A. $1,200
- B. $6,200
- C. $20,000
The answer is B.
Why should I care about compound interest and investing?
- A. Investing secures your financial future; compound interest refers to the process where the earnings on your investment generate additional earnings over time. This can lead to a more comfortable lifestyle, reduced financial stress, and the potential for early retirement.
- B. Investing seems stressful and complicated. If my parents aren’t worried about their financial future then I shouldn’t be either.
- C. Investing secures your financial future and increasing the compounding frequency doubles your interest, leading you to becoming 20x richer.
The answer is A.
For Adults/Seniors:
Jennifer is saving up for a house and wants a 20% down payment. She will invest a lump sum into a savings account for five years that pays 4.3% annual interest and compounds monthly (12 times per year). After some calculations, she figures her ideal house will cost $140,000. How much should she put in the savings account?
- A. $22,591.84
- B. $28,000
- C. $17,351.40
The answer is A.
What is compound interest?
- A. Interest calculated on the original principal only.
- B. Interest that stays constant every year.
- C. Interest added to the principal and then earns interest itself.
The answer is C.
Is it too late for me to start investing?
- A. Yes, you won’t recover from market downturns, and you’ll end up in debt anyway.
- B. No, it’s never too late to invest. While starting young does allow your investments to grow over the years, saving regularly trains you to live within your means and the power of compounding can still benefit you.
- C. No, it’s never too late to invest. As long as you only invest in 401k’s and individual stocks you’ll be richer than Mr. Monopoly himself.
The answer is B.
Sources
Onlinemath4all.com
Guide for Investment
Greenmath
Older Issues and Quiz Answers
Click here to download this issue as a PDF file.
Test Your Knowledge: Questions and Answers:
For Teens
In accounting, the term "ROI" is often used to describe the financial performance of an asset. ROI stands for "return on" WHAT?
- A. Interest
- B. investment
- C. Income
- D. Individual
The answer is B.
Which source of finance is typically required to be repaid with interest?
- A. Grant
- B. Equity
- C. Retained Earnings
- D. Loan
The answer is D.
What is the highest credit score you can achieve?
- A. 500
- B. 1,000
- C. 850
- D. 250
The answer is C.
For Adults/Seniors
What is a bear market?
- A. A time when investors are acting aggressively
- B. A time when stock prices are rising
- C. A time when stock prices are inappropriate
- D. A time when stock prices are falling
The answer is D.
If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to Federal law?
- A. Nothing
- B. $50.00
- C. $500.00
- D. $1,000.00
The answer is B.
Which of the following would be expected to hold its value best during a time of inflation?
- A. A certificate of deposit
- B. A corporate bond.
- C. A house.
- D. Don’t know.
The answer is C.
Sources
Water Cooler Trivia
ProProfs Quizzes
Personal Finance Quiz & Financial Literacy Questions
Click here to download this issue as a PDF file.
Test Your Knowledge: Questions and Answers:
For Teens
For the past 65-plus years, the S&P 500 Index Fund has averaged approximately 10% returns. With this rate of return, how much money would you have in 20 years if you invested $100 per week?
- A. $75,944.21
- B. $328,814.03
- C. $100,000.00
The answer is B.
What is the average cost of college attendance (tuition and fees, books and supplies and room and board on campus) in the United States?
- A. $9,750
- B. $38,270
- C. $28,386
The answer is B.
For Adults/Seniors
If you were able to set aside $50 each month for retirement, how much would that end up becoming 25 years from now, including interest, if it grew at the historical stock market average?
- A. About $15,000
- B. About $30,000
- C. About $40,000
- D. About $60,000
- E. More than $60,000
The correct answer is C: about $40,000, assuming a 7 percent rate of return. Only 16 percent of the 2,000 respondents answered correctly.
Suppose you have $100 in a savings account and the interest rate is 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
- A. More than $102
- B. Exactly $102
- C. Less than $102
- D. I don’t know
The correct answer is A. You’d have $102 after the first year. Over the next four years, interest will grow on that $102, meaning you’ll have more than $102. It’s a phenomenon known as compound interest.
Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
- A. More than today
- B. Exactly the same as today
- C. Less than today
- D. I don’t know
The correct answer is C: less than today. “If inflation is 2 percent, prices go up 2 percent,” says Lusardi. “But if you only earned 1 percent in your savings account, you basically can buy less.”
True or False?---Buying a single company stock usually provides a safer return than a stock mutual fund.
The answer is false. “A single company is a lot riskier than a basket of stocks,” says Lusardi. “Don’t put all of your eggs in one basket.”
Sources
Average Stock Market Return: A Historical Perspective and Future Outlook from Business Insider
Compound Interest Calculator from NerdWallet
Most Americans can’t answer these 5 basic money questions from CNBC
Average Cost of College & Tuition from Education Data Initiative