Final answer:
The reward from an investment is called its rate of return, which for bonds consists of compensation for delaying consumption, inflation adjustment, and a risk premium. In stocks, it is achieved through dividends or capital gains.
Step-by-step explanation:
The reward from an investment is commonly referred to as its rate of return. For those investing in bonds, the rate of return can be thought of as having three components: compensation for delaying consumption, an adjustment for inflation, and a risk premium. The risk premium accounts for the risk associated with the borrower's ability to repay. Furthermore, when a company issues stock, investors also anticipate a rate of return, typically through dividends or capital gains. A capital gain is the increase in the value of the stock from the time it is bought to when it is sold.