Funds Beginner: Earnings from Mutual Funds

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1.
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.
2.
A mutual fund may assume that you want a dividend reinvestment plan when you open an account.
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True. Reinvestment may be a default if you do not select an option.
3.
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.
4.
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.
5.
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.
6.
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.