Capital Gains Are Included in the Return on an Investment

question 20

Multiple Choice

Capital gains are included in the return on an investment:

• A)when either the investment is sold or the investment has been owned for at least one year.
• B)only if the investment is sold and the capital gain is realized.
• C)whenever dividends are paid.
• D)whether or not the investment is sold.
• E)only if the investment incurs a loss in value or is sold.

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Definitions:

Periodic Interest Rate

The interest rate charged or earned over a particular period of time, less than a year, on a loan or investment.

Nominal Annual Rate

Nominal Annual Rate is the annual rate of interest without taking into account the compounding of interest within a year or the effects of inflation.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Future Value

The estimated value of an investment at a specific future date, taking into account factors such as interest rates and compounding.