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1 FINANCE MCQS

Capital gain is subtracted from the return to stockholders to calculate __________.

  • Constant future rate payment
  • Constant spot rate payment
  • Constant forward rate payment
  • Periodic dividend payments
Correct Answer: D. Periodic dividend payments

Detailed Explanation

The return to stockholders generally consists of two components: dividends received and capital gains from the increase in share price. If capital gain is subtracted from the total return, the remaining part represents periodic dividend payments. These dividends are the cash flows actually received by shareholders during the holding period and serve as an important measure of income from equity investments.

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