Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
What is the difference between arithmetic and geometric mean returns?
Expert Solution
Step 1
The difference between arithmetic mean return and geometric mean return is mainly in two aspects such as:
- Way of ascertaining
- Correctness
Step 2
Arithmetic returns are the ordinary day by day appraise. It takes the arrangement of returns (in this circumstance, yearly figures), include them up, and partition the whole by the number of returns within the arrangement and it is less exact compared to the geometric cruel return.
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