A Saver Who Expects to Have a Higher Tax Rate

question 6

Multiple Choice

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

• A) Roth IRA
• B) traditional IRA
• C) 401k plan
• D) 403b plan

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Definitions:

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, reflecting the proportion of fixed costs to variable costs.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, which can also increase the risk of loss.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Average Cost

A method of inventory costing, or determining an investment's cost, by taking the total cost of items and dividing it by the total number of items.