Multiple Choice
Under a nonqualified annuity, interest is taxed after the:
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7. Receivables and Investments
Introduction to Investments in Securities
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During the 1920s, more people began to acquire shares of stock using which of the following methods?
A
Purchasing through government bonds
B
Paying with gold coins
C
Buying on margin
D
Bartering goods and services
Verified step by step guidance1
Understand the concept of 'buying on margin': This refers to the practice of purchasing stocks by borrowing a portion of the purchase price from a broker, typically using the stock itself as collateral.
Recognize the historical context: During the 1920s, the stock market experienced significant growth, and buying on margin became a popular method for individuals to invest in stocks without having the full amount of cash upfront.
Compare the options provided: Purchasing through government bonds, paying with gold coins, and bartering goods and services are not common methods for acquiring shares of stock during this period. Buying on margin aligns with the financial practices of the time.
Analyze why buying on margin was prevalent: It allowed investors to leverage their investments, potentially increasing their returns if the stock prices rose. However, it also carried significant risk if stock prices fell.
Conclude that buying on margin was the correct method: This approach reflects the financial behavior and practices of the 1920s stock market boom.
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