Basics Beginner: Introduction to Taxes and Investments

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1.
Investments in which earnings are allowed to build tax-free are called ______.
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Tax-deferred. Tax-deferred investments are those in which earnings are allowed to build tax-free until you receive them as income.
2.
Interest paid on dividends, bonds, and bank accounts is generally taxable.
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True. Interest paid on dividends, bonds, and bank accounts is generally taxable as income.
3.
_______ are taxed at a relatively low rate if you hold your investments long enough.
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Capital gains. Long-term capital gains are taxed at a lower rate to encourage investment.
4.
A tax-sheltered account always protects your investment interest from taxes.
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False. A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
5.
Investments in which earnings build tax-free until you withdraw them are called _______.
Choose wisely. There is only one correct answer.
Tax-deferred. "Tax-deferred" means that earnings build tax-free until you withdraw them.