When funds calculate their returns,they assume that all distributions
A)are withdrawn from the fund.
B)are reinvested in shares of the fund.
C)are reinvested in shares of a money market fund.
D)are reinvested in shares of a market index fund.

Question

Quizplus · Accepted Answer

When funds calculate their returns, they assume that all distributions are reinvested in shares of the fund. This is known as reinvesting dividends or capital gains. This method helps to compound the returns over time and to achieve better returns in the long run. Therefore, the best choice is B where all distributions are assumed to be reinvested in shares of the fund.

When Funds Calculate Their Returns,they Assume That All Distributions