Funds Beginner: Earnings from Mutual Funds

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1.
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.
2.
Returns of capital are generally taxed at your ordinary income tax rate.
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False. They are generally not taxed at all. However, if the return of capital exceeds the amount of after-tax dollars invested (basis), then they can be taxed as a capital gain.
3.
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.
4.
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.
5.
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.
6.
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.