WWU Finance 216 questions n answers
graded A+ latest update
Biggest cost of all - correct answer ✔✔Taxes
for all long-term investors there is one objective - correct answer ✔✔maximum total return
after taxes
Tax-deferred account - correct answer ✔✔Tax-deferred account (TDA) contributions reduce the
taxpayer's current taxes (front-end tax benefit); returns accrue tax free and are taxed when
withdrawn.
two sources of mutual fund income are subject to tax - correct answer ✔✔dividends and capital
gains. (each are taxed differently)
Qualified dividends - correct answer ✔✔Dividends that are currently taxed at maximum rate of
15% if the stock is held for at least 61 days
capital gains - correct answer ✔✔The positive difference between the purchase price of a stock
and its sale price
realized capital gains - correct answer ✔✔The gain that occurs when the owner of an asset
actually sells it for more than he or she paid for it.
unrealized capital gains - correct answer ✔✔If the stock price increases but the investor does
not sell the stock, the gain is unrealized and is not taxed
, unrealized capital loss - correct answer ✔✔A loss that results from holding onto an asset after it
has decreased in price, rather than selling it and realizing the loss. An investor may prefer to let
a loss go unrealized in the hope that the asset will eventually recover in price, thereby at least
breaking even or posting a marginal profit. For tax purposes, a loss needs to be realized before it
can be used to offset capital gains.
realized capital loss - correct answer ✔✔One upside to a realized loss is the possible tax
advantage. In most instances a portion of the realized loss may be applied against a capital gain
or realized profit to reduce taxes.
short-term capital gain - correct answer ✔✔Short-term gains and losses are netted against each
other. For example, assume a taxpayer purchased and sold two different securities during the
tax year: Security A and Security B. If he/she earned a gain on Security A of $5,000 and a loss on
Security B of $3,000, then the net short-term gain is $2,000 ($5,000 - $3,000).
long-term capital gain - correct answer ✔✔A gain or loss from a qualifying investment owned
for longer than 12 months and then sold. The amount of an asset sale that counts toward a
capital gain or loss is the difference between the sale value and the purchase value.
Turnover - correct answer ✔✔the number of times an asset is replaced during a financial
period.
Tax-Efficient Fund - correct answer ✔✔Because tax-efficient funds have a low tax liability, they
are often good investments to make outside of a tax-deferred account. This is because there is a
minimal amount of tax to be deferred and the space in an investor's tax-deferred account is
better suited for higher taxed securities, such as dividend-paying stocks.
for maximum tax-efficiency in taxable accounts, you should: - correct answer ✔✔Favor funds:
w/ low dividends, w/ "qualified" dividends, w/ low turnover, tax-efficient index funds and tax-
managed funds
graded A+ latest update
Biggest cost of all - correct answer ✔✔Taxes
for all long-term investors there is one objective - correct answer ✔✔maximum total return
after taxes
Tax-deferred account - correct answer ✔✔Tax-deferred account (TDA) contributions reduce the
taxpayer's current taxes (front-end tax benefit); returns accrue tax free and are taxed when
withdrawn.
two sources of mutual fund income are subject to tax - correct answer ✔✔dividends and capital
gains. (each are taxed differently)
Qualified dividends - correct answer ✔✔Dividends that are currently taxed at maximum rate of
15% if the stock is held for at least 61 days
capital gains - correct answer ✔✔The positive difference between the purchase price of a stock
and its sale price
realized capital gains - correct answer ✔✔The gain that occurs when the owner of an asset
actually sells it for more than he or she paid for it.
unrealized capital gains - correct answer ✔✔If the stock price increases but the investor does
not sell the stock, the gain is unrealized and is not taxed
, unrealized capital loss - correct answer ✔✔A loss that results from holding onto an asset after it
has decreased in price, rather than selling it and realizing the loss. An investor may prefer to let
a loss go unrealized in the hope that the asset will eventually recover in price, thereby at least
breaking even or posting a marginal profit. For tax purposes, a loss needs to be realized before it
can be used to offset capital gains.
realized capital loss - correct answer ✔✔One upside to a realized loss is the possible tax
advantage. In most instances a portion of the realized loss may be applied against a capital gain
or realized profit to reduce taxes.
short-term capital gain - correct answer ✔✔Short-term gains and losses are netted against each
other. For example, assume a taxpayer purchased and sold two different securities during the
tax year: Security A and Security B. If he/she earned a gain on Security A of $5,000 and a loss on
Security B of $3,000, then the net short-term gain is $2,000 ($5,000 - $3,000).
long-term capital gain - correct answer ✔✔A gain or loss from a qualifying investment owned
for longer than 12 months and then sold. The amount of an asset sale that counts toward a
capital gain or loss is the difference between the sale value and the purchase value.
Turnover - correct answer ✔✔the number of times an asset is replaced during a financial
period.
Tax-Efficient Fund - correct answer ✔✔Because tax-efficient funds have a low tax liability, they
are often good investments to make outside of a tax-deferred account. This is because there is a
minimal amount of tax to be deferred and the space in an investor's tax-deferred account is
better suited for higher taxed securities, such as dividend-paying stocks.
for maximum tax-efficiency in taxable accounts, you should: - correct answer ✔✔Favor funds:
w/ low dividends, w/ "qualified" dividends, w/ low turnover, tax-efficient index funds and tax-
managed funds
