Exam 21: Taxes, Inflation, and Investment Strategy

An investor in a 34% tax bracket would be indifferent between a corporate bond with a before-tax yield of 8% and a municipal bond with a yield of ________.

In planning for retirement, an investor decides she will save $17,000 every year for 38 years. At an 8% return on her investment, how much money will she have at the end of 38 years (to the nearest hundred thousand dollars)?

Taxes are applied to the ________.

Which one of the following is an example of "global" consumption smoothing?

Contributions to a traditional retirement plan are ________, and contributions to a Roth retirement plan are ________.

A retirement plan that offers a tax shelter will defer ________ taxes on contributions and investment earnings.

The use of a Roth IRA versus a traditional IRA will allow you to ________.

Tax shelters ________.

If you plan for a bequest for your children, your grandchildren, their children, and so on, your planning horizon becomes ________.

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

An insurance company plans to sell annuities to investors. Based on actuarial calculations, an investor has a 30-year life span, and she wants a $70,000-per-year annuity, payable at the end of each year. If the insurance company uses a 3.3% assumed investment rate, how much should the annuity cost?

You earned 8% on your corporate bond portfolio this year, and you are in a 15% federal tax bracket. If over your holding period inflation was 3%, your real after-tax rate of return was ________.

If you start saving for retirement only in your later years and your income growth from that point is rapid, then ________.