A Formula for the Accounting Rate of Return Is

question 66

Multiple Choice

A formula for the accounting rate of return is

• A) average income/initial investment.
• B) initial investment/annual cash flow.
• C) annual cash flow/initial investment.
• D) initial investment/average income.
• E) (average income + initial investment)/initial investment.

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Definitions:

RRSP

Registered Retirement Savings Plan, a Canadian account for holding savings and investment assets, intended to support retirement.

Quarterly

Occurring or done every three months.

Compounded

A method of calculating interest where previously earned interest is added to the principal amount, and then future interest is calculated on the new total.

Quarterly

Occurring every three months or four times a year.