What is the difference between gross and net returns?

• A. Gross returns include taxes and fees.
• B. Gross returns exclude taxes but include fees.
• C. Net returns subtract taxes but not fees.
• D. Gross returns exclude fees and taxes.

Answer: (D)

The key idea is that gross return is the total gain on an investment before any deductions, while net return is what you actually keep after costs are taken out. So gross returns are measured before taxes and fees, and net returns = gross return minus taxes and fees. That’s why the statement about gross returns is correct: it reflects that gross figures do not subtract taxes or fees. The difference between gross and net is precisely the impact of those costs.

If you think about it, taxes and fees reduce the amount you receive, so net returns are always lower than gross returns by the amount of those costs.