The return on equity investments:
A)is the risk free rate plus the return on debt investments.
B)consists of the risk free rate and the market premium.
C)consists of dividend and capital gains yields.
D)can never be negative.

Question

Quizplus · Accepted Answer

Return on equity investments consists of two components: dividend yield and capital gains yield. Dividend yield is the dividend paid per share as a percentage of the current market price of the stock. Capital gains yield is the increase in the stock's price over time. Therefore, option C is the correct answer. Option A is incorrect as it only considers the return on debt investments and the risk free rate. Option B is incorrect as it only considers the market premium and the risk free rate. Option D is incorrect as return on equity investments can potentially be negative, depending on the performance of the stock.

The Return on Equity Investments