Final answer:
The damages for a defrauded purchaser of securities are the actual out-of-pocket losses (option E) they incurred. These damages are intended to compensate for what was lost due to fraud, not to punish the perpetrator or speculate on what could have been gained.
Step-by-step explanation:
The damages of a defrauded purchaser of securities are measured by actual out-of-pocket losses. This means that the assessment of the damages would be based on what the purchaser actually lost as a result of the fraud, without including speculative damages or punitive amounts. The concept of sunk costs is relevant to this discussion; although sunk costs are past costs that cannot be recovered and should not influence current decisions, in the context of securities fraud, the past out-of-pocket losses directly attributable to the fraud are recoverable.
Sunk costs, such as the costs incurred in a failed investment decision, do not typically include recoverable losses due to illegal activities like fraud. Importantly, damages do not include punitive amounts as their primary purpose is to compensate the victim for the actual financial harm suffered, not necessarily to punish the perpetrator or deter future fraud. Therefore, the most accurate answer to the student's question is E. are actual out-of-pocket losses.