Which of the following best describes a brokerage account?

• A. A retirement account that provides tax advantages for long-term savings.
• B. An account used exclusively for depositing paychecks and making everyday purchases.
• C. An account that allows individuals to buy and sell securities such as stocks, bonds, and mutual funds through a licensed broker.
• D. A savings account that earns a fixed interest rate and is insured by the government.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a brokerage account. A brokerage account is a type of financial account that allows individuals to buy and sell securities such as stocks, bonds, mutual funds, and other investment products through a licensed broker.
2. Step 2: Compare the features of a brokerage account with other types of accounts mentioned in the options. For example, retirement accounts provide tax advantages for long-term savings, savings accounts earn fixed interest and are insured, and checking accounts are used for everyday transactions.
3. Step 3: Identify the unique characteristic of a brokerage account, which is its ability to facilitate investment transactions in securities.
4. Step 4: Eliminate the options that do not match the definition of a brokerage account. For instance, retirement accounts, savings accounts, and checking accounts serve different purposes and do not involve buying and selling securities.
5. Step 5: Confirm that the correct description of a brokerage account is: 'An account that allows individuals to buy and sell securities such as stocks, bonds, and mutual funds through a licensed broker.'