What is included in the cost of equity investments?

The cost of equity investments includes not only the price of the security itself but also any associated transaction costs, such as brokerage commissions and fees incurred during the purchase of that security. This comprehensive view is significant because it reflects the total cash outflow needed to acquire the investment. By adding the brokers' commissions and fees to the price of the security, investors can evaluate the true expense involved in the investment, which is crucial for calculating returns and assessing overall investment performance.

Including only the price of the security, as suggested in the first option, fails to account for additional costs that can impact net gains from the investment. Similarly, focusing solely on dividends declared overlooks other essential aspects of the investment's cost structure. Lastly, considering interest revenue is not relevant to equity investments since they do not generate interest; instead, they generate returns primarily through appreciation in value and dividends. Thus, recognizing the total cost by incorporating both the purchase price and transaction fees is essential for a valid assessment of equity investments.