Funds Beginner: Earnings from Mutual Funds

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1.
A mutual fund with a 5 percent total return and a 7 percent dividend yield will have _______ 2 percentage points in its net asset value.
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Lost. Total return – yield = net asset value. In this example, net asset value has dropped.
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.
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.
4.
Imagine that a share of your Fund X rises from 20 dollars per share to 30 dollars per share. How much of a capital gain have you made on it?
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10 dollars, but only if you have sold it. Until they have been sold, shares that rise in price will only be profits on paper.
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.
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.