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1.
Which of the following may fund a Roth IRA?
A bond that does not pay periodic interest. This is called a zero coupon bond, and it is allowed as an IRA investment. The others are not.
2.
Your ability to contribute to a Roth IRA is affected by how much money you earn.
True. After you have earned a certain amount, your ability to contribute to a Roth IRA becomes limited and eventually stops. The limit varies based on your tax filing status.
3.
Steve just recently rolled his Roth IRA from his savings account to a modestly performing bond mutual fund. But now he has discovered what an excellent performer the "Internet Sky's-the-Limit Fund" is. He may roll his IRA into that fund this very week.
False. He may do a rollover only once per year, and that applies to all of his IRAs together.
4.
Which of the following may not be used to hold a Roth IRA?
A collection of rare stamps. Collectibles are not allowed as Roth IRA investments.
5.
For which of the following situations would the 10 percent early withdrawal penalty apply to Roth IRA earnings withdrawals?
Purchase of a new car. The Roth IRA does not allow this.