Rates of return should normally be expressed on an aftertax basis,which means that:
A)Returns on tax-sheltered pensions would be compounding at a different rate than personal sums
B)Returns on tax-sheltered pensions would be compounding at the same rate as personal sums
C)Returns are generally inaccurate
D)Both a and b
E)Both b and c

Question

Quizplus · Accepted Answer

Rates of return should be expressed on an aftertax basis in order to account for any differences in taxation between different types of investments or accounts. This would mean that returns on tax-sheltered pensions (which are typically taxed differently than personal sums) would be compounding at a different rate than personal sums. Therefore, option A is correct.

Rates of Return Should Normally Be Expressed on an Aftertax