SIE practice questionmediumMutual Funds
Which investor benefit is provided by mutual fund automatic reinvestment of dividends?
- AHigher management fees
- BExemption from paying taxes on the dividends received
- CCompounding returns through purchasing more fund shares✓ Correct answer
- DGuaranteed principal protection
Explanation
Why C — Compounding returns through purchasing more fund shares
Automatic dividend reinvestment allows for compounding, but dividends are still taxable. It does not raise fees or ensure principal protection.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Companies & Packaged Products questions
- A key risk of variable annuities compared to fixed annuities is:
- Which is NOT a feature of most publicly traded REITs?
- Which is a qualified expense for a 529 savings plan distribution?
- A hybrid REIT combines the features of which two types of REITs?
- A typical hedge fund fee structure is:
- Which of the following best describes an equity REIT?
- Private equity funds are best suited for which type of investor?
- Upon maturity, a unit investment trust (UIT) typically: