Basics Beginner: Introduction to Taxes and Investments

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1.
_______ 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.
2.
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 A tax-sheltered account lets interest grow within your account without taxes until it is withdrawn. Once it is withdrawn, it may be taxed.
3.
Investments in which earnings are allowed to build tax-free are called ______.
Choose wisely. There is only one correct answer.
Tax-deferred. Tax-deferred investments are those in which earnings are allowed to build tax-free until you receive them as income.
4.
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.
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.