Which of the following describes a 'capital gain' for a mutual fund investor?

Question: Which of the following describes a 'capital gain' for a mutual fund investor?

Answer options:

• The income received from dividends and interest. ✅ The profit realized when mutual fund units are sold for more than their purchase price.
• The annual fee charged by the fund for management services.
• The value of the fund's assets minus liabilities.

Correct answer: The profit realized when mutual fund units are sold for more than their purchase price.

Explanation: A capital gain occurs when an investment asset (like mutual fund units) is sold for a price higher than its adjusted cost base (purchase price plus any reinvested distributions). This is a distinct type of return from income distributions (dividends, interest).