Q1# Flora is 45 years old and her investment objectives are long-term growth and tax minimization. She holds the following investments:

• Corporate bonds and debentures

• Guaranteed Investment Certificates (GICs)

• Government treasury bills

• Government bonds

Does Flora's investment match her objectives?

a) No. The investments produce income that is not tax efficient and is not likely to produce significant long-term growth

b) Yes. The investments are tax efficient, since the investments do not produce significant capital gains.

c) No. The investments are not tax efficient, since the investments will produce significant capital gains if the investments sell at a premium.

d) Yes. The investments have very low risk associated with them.

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Q 2# John purchased a $75,000 cash refund annuity with a guaranteed interest rate of 2.5%. Last year, John began receiving annuity payments. At the end of the year, John's annual salary was $85,000 and he received $2,500 from his annuity with $775 being interest.

What are the tax consequences?

a) John will pay tax on $87,500 at his marginal tax rate

b) John will move to the next income bracket by the income from the annuity and will pay the highest federal tax rate on all his income

c) John will only pay tax on $87,500 at his marginal tax rate

d) John will pay tax on $87,500 at his marginal tax rate.

Please answers these 2 questions with proper explanation. I submitted Q2 before but did not get the correct answer.

N.B: Your correct answers will be evaluated using Thumbs up sign. :) cheers.

Thank you.