Basics Beginner: Investment Earnings

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1.
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.
2.
Well-established, low-growth companies generally produce high capital gains.
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False. High-growth companies generally produce high capital gains.
3.
Zero coupon bonds pay out all of their earnings in the form of capital gains.
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False. Zero coupon bonds do not make interest payments or coupon payments; however, their gain in value to maturity and par value is considered accrued interest.
4.
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.
5.
All investment earnings are taxed the same way.
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False. Long-term capital gains are usually taxed at a lower rate than other forms of income, and most municipal bonds' interest payments are tax-exempt (tax-free).