Solve the problem.
-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 34%, 26%, 24%, and 22% can be
Found by computing the geometric mean of 1.34, 1.26, 1.24, and 1.22. Find that average growth factor.
A) 0.0187
B) 1.5982
C) 1.2642
D) 0.6386

Question

Quizplus · Accepted Answer

The geometric mean of 1.34, 1.26, 1.24, and 1.22 is the fourth root of their product:
(1.34) x (1.26) x (1.24) x (1.22) = 2.2368016
Fourth root of 2.2368016 ≈ 1.2642
Therefore, the average growth factor is approximately 1.2642, which is choice C.

Solve the Problem. -The Geometric Mean Is Often Used in Business and Economics