DECA+ Business Management and Administration Practice Exam

In the context of investments, what is considered a capital gain?

1. Profit from selling stocks

2. Money received from dividends

3. Income from rental properties

4. Interest earned on savings accounts

The correct answer is: Profit from selling stocks

A capital gain refers to the profit that an investor realizes from the sale of an asset, such as stocks, when the selling price exceeds the original purchase price. For example, if you bought shares of a company for $50 and later sold them for $70, the capital gain would be $20. This is considered a gain because it represents an increase in value beyond what was initially invested. The other options represent different types of income or returns that do not qualify as capital gains. Money received from dividends is typically classified as income rather than a gain from the sale of an asset. Income from rental properties refers to cash flow generated from leasing out real estate, which is categorized under rental income rather than capital gains. Interest earned on savings accounts is also a form of income, specifically interest income, and does not involve the sale of an asset like stocks. Thus, the option that accurately defines a capital gain is the profit from selling stocks.