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Understandable Statistics, Concepts and Methods
Expand Your Knowledge: Geometric Mean When data consist of percentages, ratios, compounded growth rates, or other rates of change, the geometric mean is a useful measure of central tendency. For $n$ data values,
Geometric mean $=\sqrt[n]{\text { product of the } n \text { data values, }}$ assuming all data values are positive
To find the average growth factor over 5 years of an investment in a mutual fund with growth rates of $10 \%$ the first year, $12 \%$ the second year, $14.8 \%$ the third year, $3.8 \%$ the fourth year, and $6 \%$ the fifth year, take the geometric mean of $1.10,1.12,1.148,1.038,$ and $1.16 .$ Find the average growth factor of this investment.
