TSA Test Prep Domain 3 (Part 2)

What does purchasing a stock represent?

• A loan to a corporation

• Ownership in a company

• A guarantee of fixed returns

• A contribution to a mutual fund

Which of the following is typically considered the least risky investment?

• Stocks

• Bonds

• Mutual funds

• ETFs

How do mutual funds and ETFs provide diversification?

• By investing in a single, high-performing company

• By investing in a variety of different assets

• By focusing solely on bonds

• By only investing in global markets

What is a key difference between ETFs and mutual funds?

• ETFs can only invest in stocks

• Mutual funds are traded throughout the day, while ETFs are not

• ETFs often have lower management fees than mutual funds

• Mutual funds provide diversification, but ETFs do not

What's a key characteristic of a 401(k) retirement plan?

• Contributions are not tax-deductible

• There's a penalty for withdrawing after a certain age

• It's typically sponsored by an employer

• There's no limit to how much you can contribute annually

With a traditional IRA, when are taxes paid?

• When funds are contributed

• Taxes are not paid on a traditional IRA

• When funds are withdrawn in retirement

• At the end of every fiscal year

What's a primary difference between a Traditional IRA and a Roth IRA?

• Roth IRA does not have annual contribution limits

• Traditional IRA contributions are made with after-tax dollars

• Roth IRA allows tax-free withdrawals in retirement

• Traditional IRA does not allow investments in stocks

Which investment account would be most beneficial if you expect your tax rate to be higher in retirement than it is now?

• Traditional IRA

• Roth IRA

• 401(k)

• None of the above

As of 2021, what is the annual contribution limit for a Roth IRA for those under 50?

• $6,000

• $7,000

• $19,500

• $26,000

As of 2021, what is the annual contribution limit for a 401(k) for those under 50?

• $6,000

• $7,000

• $19,500

• $26,000