Which of the Following Statements Regarding the Arithmetic Mean and the Geometric

question 37

Multiple Choice

Which of the following statements regarding the arithmetic mean and the geometric mean is true?

• A) The arithmetic mean is always a better measure of average performance.
• B) The geometric mean is always a better measure of average performance.
• C) The arithmetic mean is a better measure of performance over single periods.
• D) The geometric mean is the best estimate of the expected return for the next period.

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Definitions:

Interest

The cost of borrowing money or the return on invested capital, typically expressed as a percentage over a period of time.

Compounded Quarterly

Interest added to the principal of a deposit or loan so that the added interest also earns interest from then on. This compounding occurs four times a year.

Monthly Deposit

A fixed amount of money deposited into an account every month, often as a way to save or invest.

Savings Account

A bank account that earns interest over time, designed for storing money that is not intended for daily expenses.