Question

Carmen sold her stock in a company for a higher price per share than she bought it for. She experienced a:

A) Capital gain
B) Capital loss
C) Dividend payout
D) Stock split

Answer 1

Carmen experienced a capital gain, which is the profit made from selling a stock for more than its purchase price. This is achieved when the share's market value rises above its original buying price, excluding dividends or stock splits.

Step-by-step explanation:

When Carmen sold her stock for a higher price per share than she bought it for, she experienced a capital gain. This type of financial gain occurs when the selling price of an asset exceeds its purchase price. Specifically, in the context of stocks, a capital gain is realized when the stock value increases between the time it is bought and the time it is sold, resulting in a profit upon sale.

For example, if an investor buys a share of stock at $45 and later sells that same share for $60, the investor has achieved a gain of $15. This increase in value does not include dividends, which are direct payments to shareholders, or a stock split, which is a decision by a company to increase the number of shares owned by shareholders.