The Geometric Mean Is Often Used in Business and Economics

Multiple Choice

The geometric mean is often used in business and economics for finding average rates of change, average rates of growth, or average ratios. Given n values (all positive) , the geometric mean is the nth root of their product. The average growth factor for money compounded at annual interest rates of 30%, 12%, 20%, and 23% can be found by computing the geometric mean of 1.3, 1.12, 1.2, and 1.23. Find that average growth factor.

A) 1.2108
B) 0.5373
C) 0.0066
D) 1.466