Which Best Describes How An Investor Makes Money From An Equity Investment? By Earning Interest By Selling The Asset For A Profit By Raising Capital By Growing The Asset
Which Best Describes How An Investor Makes Money From An Equity Investment?
Answer:
An investor makes money from an equity investment primarily by selling the asset for a profit. Equity investment involves buying shares or ownership in a company. When the investor sells these shares at a higher price than the purchase price, the profit realized is how money is made from the equity investment. This process is known as capital appreciation.
While earning interest is more common in debt investments like bonds, in equity investments, the focus is more on capital gains through selling the asset at a higher price. Raising capital is the act of obtaining funds to invest and doesn’t directly relate to making money from the investment itself. Growing the asset might lead to an increase in value but the actual profit realization comes when the asset is sold for a higher price than what was paid.