Geometric vs. Arithmetic Average Returns


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question 1 of 3

Which of the following is TRUE of geometric and arithmetic average returns?

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1. If Sam has annual investment returns for the last three years of 5%, 10%, and 1%, then what is the geometric average of his returns?

2. Which of the following is the correct formula for the arithmetic mean?

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About This Quiz & Worksheet

In this assessment, we'll ask you questions related to geometric and arithmetic average returns. While most questions deal with the differences between these two calculations, you will need knowledge of each individual concept as well.

Quiz & Worksheet Goals

Our quiz will cover these topics:

  • Comparing and contrasting geometric and arithmetic average returns
  • Calculating geometric average returns using annual investment returns
  • Equation used for arithmetic mean
  • Calculating arithmetic averages based on returns value

Skills Practiced

This assessment will have you use the following skills

  • Reading comprehension - ensure that you draw the most important information from the related math lesson on average returns
  • Distinguishing differences - compare and contrast topics from the lesson, such as geometric and arithmetic average returns
  • Problem solving - use acquired knowledge to calculate geometric average returns using annual investment returns
  • Information recall - access the knowledge you've gained regarding the equation used to find arithmetic mean

Additional Learning

If you'd like to learn more about this math topic, our lesson - Geometric vs. Arithmetic Average Returns - is a useful place to start. Our professional instructors will make this complex topic easy for you to understand. View this lesson to learn about the following:

  • Why it's important to know the difference between arithmetic and geometric average returns
  • Shortcomings of arithmetic average
  • Applying knowledge of this topic to a real-world problem