What Happens When a Person Buys Shares in a Mutual

question 184

Multiple Choice

What happens when a person buys shares in a mutual fund?

• A) The person indirectly becomes owner or creditor to many companies.
• B) The person lends to and borrows from the other shareholders in the mutual fund.
• C) The person receives a fixed interest as long as he or she does not sell the shares.
• D) The person lends money to the federal government.

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Definitions:

Tax Consequence

The financial effects that taxes have on various financial decisions, affecting net investment income or costs.

Marginal Tax Rate

Marginal Tax Rate is the rate at which the last dollar of income is taxed, reflecting the percentage of tax applied to your next dollar of income.

Cash Flow Estimate

An assessment of the amount of money expected to flow in and out of a business over a specific period.

Marginally Profitable

Describes a business or investment that generates a slight profit above its break-even point.