- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Rates and Returns
- Subject 2. Rates of Return
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. |