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1.
Which of the following is not a tax-sheltered investment you can use to compound interest?
Municipal bonds. Tax-deferred retirement plans and deferred annuities provide compounding interest, but municipal bonds pay only simple interest. However, you can get the effect of compound interest with a municipal bond mutual fund if you reinvest the dividends.
2.
Interest paid on dividends, bonds, and bank accounts is generally taxable.
True. Interest paid on dividends, bonds, and bank accounts is generally taxable as income.
3.
The profits realized on the sale of appreciated stocks you held for more than a year are subject to lowered tax rates.
True. Profits made on the sale of stocks you held for more than a year are long-term capital gains, which are taxed at lower rates than regular income, including dividends and interest.
4.
Investments in which earnings build tax-free until you withdraw them are called _______.
Tax-deferred. "Tax-deferred" means that earnings build tax-free until you withdraw them.
5.
Investments in which earnings are allowed to build tax-free are called ______.
Tax-deferred. Tax-deferred investments are those in which earnings are allowed to build tax-free until you receive them as income.