Marco bought 100 shares of Xtreem Energy Drink stock at $75 per share.

QUESTION

Marco bought 100 shares of Xtreem Energy Drink stock at $75 per share. One year later the stock price is $87, and Marco is content to watch his investment grow. Which of the following statements is true?

A) Marco has earned a capital gain of $1,200.
B) Marco has earned a capital gain of $12.
C) Marco has earned no capital gain.
D) Marco has taken a capital loss of $1,200.
E) Marco has taken a capital loss of $12.

ANSWER

Answer: C
Explanation: C) Capital gains are earned when a security is sold at a price that is higher than the purchase price. Marco has not sold his securities, so he has not earned a capital gain even though the price of the security has risen from his purchase price.