{"id":25131,"date":"2021-08-12T10:06:05","date_gmt":"2021-08-12T10:06:05","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=25131"},"modified":"2026-08-05T15:38:42","modified_gmt":"2026-08-05T15:38:42","slug":"alternative-mean-definitions-for-different-investment-problems","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/uncategorized\/alternative-mean-definitions-for-different-investment-problems\/","title":{"rendered":"Alternative Mean Definitions for Different Investment Problems"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Which of the following means is the most suitable for data with more than one period?\",\n    \"text\": \"Options:\\nA. Weighted mean.\\nB. Arithmetic mean.\\nC. Geometric mean.\",\n    \"answerCount\": 1,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is C. The geometric mean is the most suitable measure of central tendency when calculating the average return or growth rate over multiple periods because it accounts for compounding effects. Option A is incorrect because the weighted mean is used when observations have different levels of importance or weights. Option B is incorrect because the arithmetic mean is generally more appropriate for single-period data and does not account for compounding over multiple periods.\"\n    }\n  }\n}\n<\/script>\n\n\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/M0gKgPztSoM\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Suitability of Alternative Mean Definitions for Different Investment Problems<\/h2>\n<p>$$<br \/>\n\\begin{array}{l|l}<br \/>\n\\textbf { Type of Data } &amp; \\textbf { Mean to Use } \\\\<br \/>\n\\hline \\text { Single period data } &amp; \\text { Arithmetic mean } \\\\<br \/>\n\\hline \\text { More than one-period data } &amp; \\text { Geometric mean } \\\\<br \/>\n\\hline \\begin{array}{l}<br \/>\n\\text { Data where each observation has different } \\\\<br \/>\n\\text { weights }<br \/>\n\\end{array} &amp; \\text { Weighted mean } \\\\<br \/>\n\\hline \\text { For ratios and rates } &amp; \\text { Harmonic mean } \\\\<br \/>\n\\hline \\text { For data having extreme outliers } &amp; \\text { Trimmed mean or Winsorized mean } \\\\<br \/>\n\\end{array}<br \/>\n$$<\/p>\n<blockquote>\n<h2><strong>Question\u00a0<\/strong><\/h2>\n<p><span data-preserver-spaces=\"true\">Which of the following means is the <\/span><em><span data-preserver-spaces=\"true\">most\u00a0<\/span><\/em><span data-preserver-spaces=\"true\">suitable for data with more than one period?<\/span><\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li><span data-preserver-spaces=\"true\">Weighted mean.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Arithmetic mean.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Geometric mean.<\/span><\/li>\n<\/ol>\n<p><strong><span data-preserver-spaces=\"true\">Solution<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">The correct answer is <strong>C<\/strong>.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The geometric mean is mostly used when calculating the mean of data with more than one period.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">A is incorrect<\/span><\/strong>. <span data-preserver-spaces=\"true\">The weighted mean is suitable for data where each observation has different weights.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">B is incorrect<\/span><\/strong>. <span data-preserver-spaces=\"true\">Arithmetic mean<\/span><span data-preserver-spaces=\"true\"> is suitable for single-period data.<\/span><\/p><\/blockquote>\n\n\n<div style=\"text-align: center; margin: 30px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\">Start Free Trial \u2192<\/a> <p style=\"margin-top: 12px; font-size: 16px; line-height: 1.5;\">Strengthen your understanding of alternative mean definitions, investment return calculations, and quantitative analysis applications with CFA Level I study notes, practice questions, and mock exams.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Suitability of Alternative Mean Definitions for Different Investment Problems $$ \\begin{array}{l|l} \\textbf { Type of Data } &amp; \\textbf { Mean to Use } \\\\ \\hline \\text { Single period data } &amp; \\text { Arithmetic mean } \\\\ \\hline&#8230;<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-25131","post","type-post","status-publish","format-standard","hentry","category-uncategorized","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - 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