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Funds 103: Earnings from Mutual Funds

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1.
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.
2.
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.
3.
Which of the following is not a dividend?
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The sale of a mutual fund share. When individual shareholders sell their shares, these shares are not dividends.
4.
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.
5.
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.
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.