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Funds 103: Earnings from Mutual Funds

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1.
Because it is a sum, a total return is positive.
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False. If there has been a substantial loss in net asset value, the sum may be negative.
2.
A return of capital is a type of what?
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None of the above. Returns of capital are merely your own money returned to you.
3.
How does a mutual fund increase its value?
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It receives the dividends, interest, and capital gains from the securities in its portfolio. The fund then passes these earnings to shareholders.
4.
You earn capital gains from your mutual fund shares when you sell them for a profit.
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True. Capital gains result from selling your assets that have risen in value.
5.
Reinvested dividends are tax-free because they don't reach the investor.
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False. As long as they are earned, they will be taxed no matter where they end up.
6.
Which of the following is not a dividend?
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The sale of a mutual fund share. When individual shareholders sell their shares, these shares are not dividends.