Which of the following statements about the expected return from the capital market is correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Shareholders share a company’s prosperity by way of high dividends and bonus issues.
Option (1) The possibility of earnings is higher if securities are held for a shorter duration. — Incorrect. Earnings are higher if the securities are held for a longer duration.
Option (2) There is the scope of earning capital gains mainly in debentures. — Incorrect. The scope of earning capital gains is in equity shares.
Option (3) In the long run, debenture holders share a company’s prosperity by way of bonus issues. — Incorrect. Bonus issues go to shareholders, who share the company’s prosperity in the long run.
Option (4) Shareholders share a company’s prosperity by way of high dividends and bonus issues. — Correct. In the long run, the prosperity of a company is shared by shareholders through high dividends and bonus issues.
NCERT (Pre-rationalised Edition): “(vii) Expected return: The investment in capital markets generally yield a higher return for investors than the money markets. The possibility of earnings is higher if the securities are held for a longer duration. First, there is the scope of earning capital gains in equity share. Second, in the long run, the prosperity of a company is shared by shareholders by way of high dividends and bonus issues.” |