What is the formula for calculating the Capital Gains Rate?

The formula for calculating the Capital Gains Rate is derived from the difference in the price of an investment over a specific period, relative to its initial price. The correct formula, which measures the return from the appreciation in the value of an asset, is (Ending Price - Starting Price) / Starting Price.

This formula calculates the change in price (the capital gain) and then expresses that change as a proportion of the initial investment (the starting price). By doing so, it provides a clear percentage that represents how much the value of the investment has increased relative to its original cost. This is particularly useful for investors to evaluate their investment performance over time.

In contrast, other options refer to financial concepts that are not directly related to capital gains. For instance, one option involves price increase in a general sense rather than the formula needed for capital gains. Others focus on cash flows or dividends, which pertain to income generation rather than appreciation in asset value, hence not applicable in the context of calculating capital gains.