1. Calculating Average Investment Returns
Financial AnalystBackground
An analyst is reviewing a mutual fund's performance over four years. The fund grew by 8%, 12%, dropped by 3%, and grew by 15%. The growth factors are 1.08, 1.12, 0.97, and 1.15.
Problem
Finding the true compound average growth rate, as the arithmetic mean would overstate the actual returns.
How to use
Enter the growth factors into the dataset field and set decimal places to 4.
Dataset: 1.08, 1.12, 0.97, 1.15 | Decimal Places: 4Outcome
The tool outputs a geometric mean of 1.0778, indicating a true average annual growth rate of 7.78%.