Which one of the following should be used as the mean return when you are defining the normal distribution of an investment's annual rates of return?
A)arithmetic average return for the period
B)geometric average return for the period
C)total return for the period divided by N − 1
D)arithmetic average return for the period divided by N − 1
E)geometric average return for the period divided by N − 1

Question

Quizplus · Accepted Answer

The arithmetic average return is used as the mean return when defining the normal distribution of an investment's annual rates of return because it represents the expected return in any given year.

Which One of the Following Should Be Used as the Mean