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Funds 103: Earnings from Mutual Funds

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1.
Ordinary dividends are earned when a mutual fund sells securities for a profit.
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False. Capital gains dividends are earned in this way, but ordinary dividends are distributions of interest or dividends from the fund's holdings.
2.
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.
3.
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.
4.
Total return includes capital gains distributions.
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True. Capital gains distributions are dividends.
5.
A capital gain on a share held for five years will be taxed at a lower rate than a share held for four months.
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True. Once you have held a share for more than one year, your capital gains tax drops.
6.
The confirmation statement sent to investors after a dividend reinvestment states all but which of the following?
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An investor's capital gains. Capital gain information arrives in a different notice.
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