What is capital gain?

Capital gain refers to the profit that an investor realizes when selling a security for a price that is higher than the purchase price. This concept is fundamental in the realm of investing and economics, as it directly relates to the return on investment. When an asset such as stocks or real estate is sold for more than it was originally bought for, the difference is classified as a capital gain, which can be realized through the sale when the investment is liquidated.

In the context of investment income, capital gains are a primary measure of success for many investors and are often subject to taxation depending on the jurisdiction and the duration for which the asset was held. This distinguishes capital gains from other forms of income such as interest from bonds or dividends received from stock ownership, which reflect different ways of generating earnings through investments.

Therefore, the statement describing capital gain as the profit earned from selling a security encapsulates its core definition accurately, making it the correct choice in this context.