The Geometric Mean (Part 2)

ADMS 2320: TERM TEST #1 PREP · Winter 2025 Chapter 4: Numerical Descriptive Techniques The Geometric Mean (Part 2)

The Geometric Mean may be more accurate than the arithmetic mean for calculating average rates of return, growth rates, or compounding interest rates. However, for estimating future rates of return, the arithmetic mean is more appropriate.

Test your understanding:

Question 1 of 2

1. Question
What is the arithmetic mean used for in the context of rates of return?
- 1. a) Calculating the sum of a series of numbers
- 2. b) Estimating future rates of return
- 3. c) Calculating average rates of return, growth rates, or compounding interest rates
- 4. d) Calculating the median of a series of numbers
Correct

Incorrect
Question 2 of 2

2. Question
What does the ‘n’ in the nth root of the geometric mean formula represent?
- 1. a) The number of periods
- 2. b) The rate of return
- 3. c) The total growth
- 4. d) The growth rate
Correct

Incorrect