Which of the following is NOT correct?

The question asks which statement is NOT correct.

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Statement 1: Nominal rate of return is the total amount of money earned by an investment without considering various expenses.

This is correct. The nominal rate represents the raw return without subtracting expenses like fees, taxes, or inflation.

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Statement 2: The compound annual growth rate is calculated by the final and beginning value of the investment.

This is correct. CAGR requires the starting value, ending value, and the number of years.

CAGR $= \left(\frac{\text{Ending Value}}{\text{Beginning Value}}\right)^{1/n} - 1$

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Statement 3: The compound annual growth rate describes the effect of compounding.

This is correct. CAGR shows how an investment grows when earnings are reinvested, smoothing out volatility to show an average annual growth rate with compounding assumed each year.

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Statement 4: The actual rate of return can be calculated by adding the various expenses into the total money earned.

This is NOT correct. Expenses must be subtracted, not added.

Actual return $= \text{Total earned} - \text{Expenses}$

The statement incorrectly suggests adding expenses to total earnings.

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Therefore, the answer is Option 4.