Ethan Wants to Purchase Some Stock for the First Time

question 127

Multiple Choice

Ethan wants to purchase some stock for the first time. Which of the following is correct?

• A) His account executive should be encouraged to churn Ethan's account to maximize his return.
• B) He should use an online broker to get professional help about purchasing stock.
• C) His purchase price will exactly equal the number of shares he purchases times the average price per share and is known in advance.
• D) If he uses a commission order, he can lock in the price at which he wants to buy the stock.
• E) His commission should be lower at an online broker than at a full-service broker.

---

Definitions:

Gift Tax

A levy imposed on the act of transferring property from one person to another without receiving full value or any compensation in return.

Purchase Price

The amount of money paid to buy a good, service, or asset; fundamental in calculating the basis for investment or tax purposes.

Capital Loss Deduction

A tax deduction that allows individuals to offset their capital gains with any losses they incurred on investments in a given tax year.

Carryover

Unused tax credits or deductions that can be applied to future tax years to reduce tax liability.