Investing W!SE Review - CodeRVA
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Other
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10th - 12th Grade
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Practice Problem
•
Medium
MaryEllen Fines
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4 Slides • 4 Questions
1
Investing W!SE Review - CodeRVA
2
Multiple Choice
Can Cathy withdraw money from her IRA
savings account?
Answer A Money cannot be withdrawn from an IRA before
age 59
Answer B There is a 10% penalty on any money she takes
out before age 59
Answer C She can take out the money at any time since
she made the deposits
Answer D There is a 50% penalty if she does not start
withdrawing money at age 59
a
a
a
a
3
Multiple Choice
One of the benefits of holding an investment for
over a year rather than selling it in less than a
year is that the
capital gains on the investment will be taxed at a
lower rate.
fees will not be charged by brokers for selling the
investment.
money earned on the investment will be
considered tax-free.
profits on the investment can be averaged over
the length of time the investment is held.
4
Capital Gains
Capital gains are profits made from the sale of
capital assets such as stocks and bonds and are
tax deferred until the asset is sold. Capital assets
that are held over one year are considered long-
term capital gains and are taxed at a lower tax
rate or in some cases are not taxed at all.
5
Multiple Choice
Interest earned on interest is known as:
Variable interest
Interest Squared
Compounded interest
Simple interest
6
Multiple Choice
To determine the time value of depositing $2,000
in a savings account, a person needs to know the interest rate and
whether the bank offers overdraft protection.
the rate of inflation.
whether the account is FDIC protected.
her total income.
7
Time Value of Money
The time value of money is a way of looking at how much a saving or investment is worth at the end of a period of time when it is compared to the rate of inflation during that period and the person's earning power.
It may not seem as though depositing $100 a month in a retirement account when someone is 23 makes a whole lot
of sense; why not wait until age 40 when it will probably be a lot easier to deposit $250 or $30
8
Time Value of Money
Compound interest enables the saver to earn interest on the interest that was earned earlier
However, the other factor to consider in making deposits to a regular savings account is the rate of interest as compared to the rate of inflation. If the annual rate of inflation is 03% and the interest earned on money is 01%, the deposit is actually going to have less purchasing power at the end of the year than it did at the start.
Investing W!SE Review - CodeRVA
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