The ________ measure of returns ignores compounding.
A) geometric average
B) arithmetic average
C) IRR
D) dollar-weighted

Question

Quizplus · Accepted Answer

The arithmetic average measures the simple average of returns without considering the effect of compounding. The geometric average, on the other hand, accounts for compounding and is a better measure of investment performance over multiple periods. Choice A, C, and D are not correct as they do consider the effect of compounding.

The ________ Measure of Returns Ignores Compounding