The geometric mean return is preferred over the arithmetic mean when:

A Returns are constant

B Evaluating compound growth over multiple periods

C Calculating standard deviation

D Returns are independent

✓ Correct Answer: Option B

The geometric mean accounts for compounding and accurately represents growth over time.

💡 Why is B) the correct answer?

The correct answer to the question "The geometric mean return is preferred over the arithmetic mean when:" is Option B: Evaluating compound growth over multiple periods.

The other options — A) Returns are constant, C) Calculating standard deviation, D) Returns are independent — are incorrect for this CFA Exam Prep question. As explained above: The geometric mean accounts for compounding and accurately represents growth over time.

📚 About This CFA Exam Prep Practice Question

This 2-level CFA Exam Prep question from the Quantitative Methods topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

Practice CFA Exam Prep Quizzes → Browse All Questions Study Flashcards

The geometric mean return is preferred over the arithmetic mean when:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

Related CFA Exam Prep Questions