Exam 21: Taxes,inflation,and Investment Strategy

A bond and a stock portfolio both provided unrealized pretax return of 8% to a taxable investor.If the stocks paid no dividends we know that the ________.

The fact that the U.S.government provides deposit insurance to banks creates a form of ___________ which is at least partially offset by requiring banks to hold more capital if they are riskier.

A non-profit organization offers a 5% salary contribution to John's 403b plan and matching 5% when John contributes 5% of his/her salary. John makes $56,000 a year. -What is John's effective salary reduction if he is in the 25% tax bracket?

Inflation has an adverse effect on your savings because ____________. I.it erodes the purchasing power of the dollars you have saved II.it increases the real rate of return on the dollars you save III.unless sheltered,it increases the taxes owed on investment income

An investor plans to retire at age 60,with a total savings of $1,000,000.If she is currently 35 years old,has no savings,and expects to earn 8% per year on her investments,how much money must she set aside every year?

A saver who expects to have a higher tax rate after retirement would prefer a ______.

A decrease of 1% in both your tax exemption and your income tax rate would on net _______________.

An IRA-style tax shelter will defer ______________ taxes on contributions and investment earnings.

The tax effect of a traditional IRA is to _____ taxes.

The solvency of Social Security is threatened by ______________.

An investor has an effective tax rate on all items of 30% and he decides to put $8,000 into a 401(k).The future value of the investment that results from the deferral of taxes over 30 years at an 8% return equals _____________.

A worker plans to retire in 30 years.He hopes to receive $65,000 per year in retirement income.If inflation is forecast at 2.5% per year,what annual income should he plan to receive in the first year of retirement in order to maintain the purchasing power on $65,000?

An investor must decide between putting $2,000 into a regular IRA or put $1,440 into a Roth IRA.If the investor's tax rate is 28% now and in retirement,and she expects to earn 12% per year over the next 20 years,which will produce more cash in the end?

An investor who is in the 35% federal tax bracket and the 5% state bracket buys a 6.5% yield corporate bond.What is his after tax yield?

How many years of Social Security contributions count for determination of benefits?

An insurance company plans to sell annuities to investors.Based on actuarial calculations,an investor has a 20 year life span and they want a $50,000 per year annuity,payable at the end of each year.If the insurance company uses a 3% assumed investment rate,how much should the annuity cost?

A non-profit organization offers a 5% salary contribution to John's 403b plan and matching 5% when John contributes 5% of his/her salary. John makes $56,000 a year. -What is John's total cost of his 5% contribution?

You want to minimize your current tax bill by maximizing your contributions to your _____________.

If your marginal tax rate is 15% your capital gains tax rate on a stock you have held for 10 years would be ___.

Taxes are applied to the _______________________.