CFA Level I · CFA Level I Exam · Types of Financial Returns
A portfolio manager reports a return calculated after deducting trading costs, management fees, and administrative expenses, but before any taxes the investor pays. This return is best described as a:
The return is best described as a pre-tax nominal return. Fees, trading costs, and expenses are already deducted, so it is not a gross return, but taxes have not been deducted, so it is not an after-tax return. No inflation adjustment is mentioned, so it is nominal.
- Agross return
- Bpre-tax nominal returnCorrect
- Cafter-tax real return
Explanation
Gross return is before management and administrative fees (it may include only trading costs deducted). Here fees and expenses have been deducted, so it is a net return, and since taxes are not yet deducted it is a pre-tax return. The after-tax real return would require deducting taxes and adjusting for inflation, which has not been done.
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