Choose wisely. There is only one correct answer to each question.
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1.
If you're considering selling an appreciated investment that you bought 11 months ago, why might it make sense to hold it another month before selling it?
Because the capital gains tax would be lower after the 12 months. The lower capital gains tax can be quite an advantage for you.
2.
Variable annuities (VAs) are a kind of hybrid between mutual funds and _______.
Insurance. Variable annuities are essentially mutual funds wrapped in an insurance package.
3.
Which statement is true?
Funds with exceptionally low turnover rates tend to be tax efficient. High-turnover funds aren't necessarily less tax efficient than low-turnover funds. A fund with a 200% turnover rate can be just as efficient as a fund with a 50% turnover rate. But funds with 0% to 20% turnover rates tend to be tax-efficient.
4.
Municipal bonds offer tax breaks; however, they often pay lower interest rates than taxable bonds. In these cases, what factor would decide whether an investor would choose a municipal bond over a taxable bond?
Her tax bracket. The higher her tax bracket, the more likely the municipal bond would actually work in her favor.
5.
Exchange-traded funds _______ pass capital gains taxes to their shareholders.
Do not. ETFs only generate taxes by owning dividend-paying stocks or by changing their holdings to reflect changes in their indexes.
