An anlast collects the following set of ten returns from previous years:
Year 1 2.2%
Year 2 6.2 %
Year 3 8.9%
Year 4 9.3%
Year 5 10.5%
Year 6 11.7%
Year 7 12.3%
Year 8 14.1%
Year 9 15.3%
Year 10 18.4%
The geometric mean return is closest to:
A. 9.62%
B. 10.8%
C. 10.89%
I tried number of times, it doesnt give me the answer B. Therefore i need help on this.
Adding 1 to all rates and multiplying across gives me 2.789236. The 10th root is 1.108022 and subtracting 1 gives an answer of 10.8%.
On the real exam, they’ll never give you ten returns and ask you to calculate the geometric mean return.
That’s absurd.
They’ll give you three, maybe four, tops.
I tried it and got the answer just fine.
Here is the formula below:
Be sure to do the tenth root of everything and then subtract 1.
Like @S2000magician said, it’s unrealistic of them to ask you to calculate the geometric mean with that many returns.
Agree that they will never ask for 10 period.
The answer I got was 10.78%. Rounding 10.8%
Just add 1+percentage in decimals ~ 2.2% → 0.022…
Multiply all years and then 10 root
