Basics Beginner: Investment Earnings

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1.
All investment earnings are taxed the same way.
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False. Long-term capital gains are usually taxed at a lower rate than other forms of income, and most municipal bonds' interest payments are tax-exempt (tax-free).
2.
What are a security's increases in value called after they are sold?
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Capital gains. They are capital gains after they are sold, but paper profit while they are still held.
3.
Which of the following choices is not a way that earnings are paid to bondholders?
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Dividends. Dividends are paid to stockholders but not to bondholders.
4.
What is your one-year return on investment if you buy a stock for $50, receive a dividend of $3, and sell it for $55?
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16 percent.
5.
If you experience a capital loss after selling an investment, and the loss exceeds the $3,000 that you are allowed to take a tax deduction on, what happens to the excess amount?
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You can carry it over to the next year and deduct it. Losses over $3,000 can be carried over to future years.