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Funds 103: Earnings from Mutual Funds

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1.
Total return includes capital gains distributions.
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True. Capital gains distributions are dividends.
2.
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.
3.
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.
4.
The number of mutual fund shares that investors own determines how much of a dividend is passed on to them.
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True. Dividend payments vary according to number of shares owned.
5.
Mutual fund dividends are passed to investors from ______.
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The earnings of the securities in a fund. The fund passes earnings from its portfolio in the form of dividends to its shareholders.
6.
Returns of capital in a mutual fund are paid to augment dividends.
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False. Returns of capital may be paid to investors for any of several reasons, such as excess cash, but not to augment dividends.