CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

The difference between an arithmetic average and a geometric average of returns ______.
A. increases as the variability of the returns increases
B. increases as the variability of the returns decreases
C. depends on the specific returns being averaged but is not necessarily sensitive to their variability

User Contributed Comments 6

User Comment
Goran80 Difference between an arithmetic average and a geometric average of returns increses as the variability of the returns!!!
RicoNone Did you actually pass the exam?
Bobokoko What are you, a parrot???
rv6007 can someone please explain this?
dini85 Take an eg:
1) .05r and .25r (AM=.15 & GM=.1456) Diff=.0044
2) .02r and .35r (AM=.185 & GM=.1735) Diff =.0115

Diff in AM & GM increases when the RANGE (variability) increases.
EEEEvia the more dispersed of the rates of returns, the greater difference between the two.
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