There Are Three Ways That Taxable Income Can Be Generated

question 76

True/False

There are three ways that taxable income can be generated for investors in mutual funds without the investor actually receiving any income.

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Definitions:

Restrictive Covenants

Restrictive covenants are terms or conditions included in contracts or agreements that restrict or limit certain actions or behaviors to protect business interests.

Market Interest Rates

The prevailing rates at which interest is paid on borrowings or earned on investments in the financial market.

Call Features

Provisions embedded in financial instruments, like bonds, that allow the issuer to repurchase or redeem the instrument before its maturity date.

Call Penalties

Fees or costs that a borrower must pay a lender for the privilege of paying a loan off earlier than the agreed payment schedule.