ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the difference between the selling price and purchase price that results in a large financial gain for the seller
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the difference between the selling price and purchase price that is a huge financial loss for the seller
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a market in which money is lent for periods of one or more years
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None of the above
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Detailed explanation-1: -Definition: Capital gain is the profit one earns on the sale of an asset like stocks, bonds or real estate. It results in capital gain when the selling price of an asset exceeds its purchase price. It is the difference between the selling price (higher) and cost price (lower) of the asset.
Detailed explanation-2: -One of the ways the fund makes money for you is to sell these assets at a gain. If the mutual fund held the capital asset for more than one year, the nature of the income from a sale of the capital asset is capital gain, and the mutual fund passes it on to you as a capital gain distribution.
Detailed explanation-3: -A capital gain is the increase in a capital asset’s value and is realized when the asset is sold. Capital gains apply to any type of asset, including investments and those purchased for personal use. The gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.
Detailed explanation-4: -If you sell an asset for more than you paid for it, your profit (minus your cost basis) is called a capital gain. Short-term capital gains are profits from selling assets you own for a year or less.
Detailed explanation-5: -Short-term Capital Gains are those that you earn when you sell an asset in under 36 months (3 years) from the date on which you acquired the asset. Long-term Capital Gains are those that you earn when you sell an asset after 36 months (3 years) from the date on which you acquired the asset.