Which term is the income return on an investment?

Which term is the income return on an investment?

• A. Dividends
• B. Capital Asset
• C. Yield
• D. Capital Gain and Loss

Answer: (C)

Income return refers to the cash flow an investment generates relative to its cost, and the term that captures that concept is yield. Yield expresses the income as a percentage of price or cost, such as dividend yield (annual dividends divided by price) or current yield on a bond (annual interest divided by price). This focuses on the ongoing income from the investment rather than changes in the asset’s price. Dividends are a form of income, but they’re a component of yield rather than the overall measure of income return. Capital gains and losses, and capital assets, describe price changes or the type of asset, not the income earned.

Income return refers to the cash flow an investment generates relative to its cost, and the term that captures that concept is yield. Yield expresses the income as a percentage of price or cost, such as dividend yield (annual dividends divided by price) or current yield on a bond (annual interest divided by price). This focuses on the ongoing income from the investment rather than changes in the asset’s price.

Dividends are a form of income, but they’re a component of yield rather than the overall measure of income return. Capital gains and losses, and capital assets, describe price changes or the type of asset, not the income earned.