-The Value of an Investment at the End of Each

question 8

Multiple Choice

$\begin{array}{|c|c|}\hline \text { Year } & \begin{array}{c}\text { Return } \\\mathbf{( \% ) }\end{array} \\\hline \text { Year } 1 & 7 \% \\\hline \text { Year } 2 & 17 \% \\\hline \text { Year } 3 & -2.4 \% \\\hline \text { Year } 4 & 2 \% \\\hline\end{array}$
-The value of an investment at the end of each of four years is shown above.What is the arithmetic average return over the four years?

• A) \(-5.75 \%\)
• B) \(4.00 \%\)
• C) \(4.25 \%\)
• D)\(5.90\%\)

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Definitions:

Schedule D

A form used with individual tax returns in the United States to report capital gains and losses from investments.

Section 1231

A tax term in the United States that refers to the treatment of certain property, blending both capital and ordinary tax treatment.

Preferential Rates

Preferential rates refer to lower tax rates applied to certain types of income, such as qualified dividends and long-term capital gains, compared to ordinary income tax rates.

Capital Loss

The loss incurred when a capital asset, like stocks or real estate, is sold for less than its purchase price.