When will the geometric average annual rate of return be equal to the arithmetic average annual rate of return?
A)when all the annual returns are either positive or zero
B)when there is no variability in the annual returns
C)The geometric average annual rate of return will never equal the arithmetic average annual rate of return.
D)when all the annual returns are positive

Question

Quizplus · Accepted Answer

The geometric average annual rate of return equals the arithmetic average annual rate of return when there is no variability in the annual returns, meaning all the returns are the same each year. This is because the geometric average, which accounts for compounding, matches the arithmetic average when compounding has no effect due to consistent returns.

When Will the Geometric Average Annual Rate of Return Be