Question

You have calculated the historical dollar weighted return, annual geometric average return and annual arithmetic average return. You always reinvest your dividends and interest earned on the portfolio. Which method provides the best measure of the actual average historical performance of the investments you have chosen?

A. dollar weighted return.
B. geometric average return.
C. arithmetic average return.
D. index return.

Answer 1

B. Geometric average return.

Step-by-step explanation:

Geometric average return is also known as geometric mean return, primarily used for investments that are compounded. It is used to calculate the total divided by how many periods there is.