Which term describes the profit made on an investment when the selling price exceeds the purchase price?

• A. Capital gain
• B. Dividend yield
• C. Market value
• D. Return on investment

Answer: (A)

The term that describes the profit made on an investment when the selling price exceeds the purchase price is known as a capital gain. A capital gain occurs when an asset, such as stocks or real estate, is sold for more than its original purchase price, thus reflecting the increase in value of the investment over time. This gain is a crucial concept in investing, as it indicates the financial benefit derived from an investment decision.

In contrast, other terms like dividend yield refer to the income generated from dividends relative to the stock price, market value pertains to the current price of an asset in the market, and return on investment encompasses the overall efficiency of an investment, usually factoring in both gains and costs associated with that investment. These concepts relate to different aspects of financial performance and investment returns but do not specifically denote the profit earned from an increase in asset value alone.