chapter 10 finance and investment

What does "pruning your tax tree" typically involve?

• combining investment accounts

• selling off losing investments to offset gains

• reducing taxable income through deductions

• maximizing retirement account contributions

What is a rollover IRA primarily used for?

• converting a traditional IRA to a roth IRA

• moving funds from 401(k) after leaving a job

• pooling multiple IRAs into one account

• investing in foreign stocks

A key difference between a 401(k) and an IRA is that only 401(k)s offer employer matching

• True
• False

What is the primary feature of a margin account?

• buying investments with borrowed money

• tax-free growth on dividends

• no fees for trading stocks

• guaranteed returns on investments

Which of the following are one of the three parts of a tax tree?

• tax-deferred accounts

• tax-free accounts

• taxable accounts

• tax-penalty accounts

What does "margin" mean in the context of a brokerage account?

• the profit made from a stock sale

• the difference between the purchase price and selling price

• the amount of money borrowed from a broker to buy securities

• the fee charged for managing the account

The difference between contributions and earnings in a roth IRA is that earnings are guaranteed, contributions are not

• True
• False

What do you need to open a roth IRA?

• proof of self-employment

• earned income and a social security number

• minimum initial investment of $10,000

• certified financial advisor

Which of the following is NOT a type of investment account?

• traditional IRA

• roth IRA

• savings account

• brokerage account

Can a roth account be considered the best retirement vehicle due to tax-free withdrawals in retirement?

• yes

• no