Which one of the following is defined as the average compound return earned per year over multiyear period? A. Geometric average return B. Variance of returns C. Standard deviation of returns D. Arithmetic average return E. Normal distribution of returns

Respuesta :

(Option A) The geometric average return is defined as the average compound return earned per year over a multiyear period.

Geometric Average Return in Multiyear Periods

The geometric average return is a mathematical measurement of the average compound return earned per year over a multiyear period. It is calculated by taking the nth root of the product of all the returns in the multiyear period, where n is the number of years in the period.

This is different from the arithmetic average return, which calculates the average return over a multiyear period by simply adding up all the returns and dividing by the number of years in the period. The geometric average return is a more accurate measurement of the average return earned over the entire period, as it takes into account the compounding effect of returns.

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