The General Form of the Annualized After-Tax Rate of Return

question 65

Multiple Choice

The general form of the annualized after-tax rate of return (annualized ATROR) can be expressed as

• A)r_ann = [(1 + R)ⁿ(1 - t_n)+ t_n]^1/n - 1.
• B)r_ann = [(1 - R)ⁿ(1 - t)+ t]^1/n - 1.
• C)r_ann = [(1 + R)ⁿ(1 + t)+ t]^1/n - 1.
• D)r_ann = [(1 + R)ⁿ(1 + t)- t]^1/n - 1.

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Definitions:

Portfolio

A group of investment vehicles comprising equities, debt instruments, natural resources, actual currency, and cash-like assets, also covering collective investments such as closed-end funds and exchange-traded funds.

Geometric Average Return

The average rate of return on an investment per year, geometrically linked to account for the compounding effect of returns over time.

Arithmetic Average Return

The simple mean of a series of returns over a specific period, often used to gauge the performance of an investment.

Statistically Significant

Refers to a result that is not likely to occur randomly or by chance, but rather is likely to be attributable to a specific cause.