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Square Root Cube Root

The document discusses the arithmetic mean and geometric mean. [1] The arithmetic mean is the sum of a set of numbers divided by the count and is used to calculate average. [2] The geometric mean uses the product of a set of numbers and is used for values that are meant to be multiplied, such as compound interest. [3] The geometric mean is always less than the arithmetic mean and can only be used for positive numbers.

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55 views

Square Root Cube Root

The document discusses the arithmetic mean and geometric mean. [1] The arithmetic mean is the sum of a set of numbers divided by the count and is used to calculate average. [2] The geometric mean uses the product of a set of numbers and is used for values that are meant to be multiplied, such as compound interest. [3] The geometric mean is always less than the arithmetic mean and can only be used for positive numbers.

Uploaded by

Afiq Danial
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Introduction

Arithmetic Mean

In mathematics and statistics, the arithmetic mean, or simply the mean or


the average (when the context is clear), is the sum of a collection of numbers divided by the
count of numbers in the collection.[1] The collection is often a set of results of an experiment or
an observational study, or frequently a set of results from a survey. The term "arithmetic mean"
is preferred in some contexts in mathematics and statistics, because it helps distinguish it from
other means, such as the geometric mean and the harmonic mean .

In addition to mathematics and statistics, the arithmetic mean is used frequently in many diverse
fields such as economics, anthropology and history, and it is used in almost every academic field
to some extent. For example, per capita income is the arithmetic average income of a nation's
population.
While the arithmetic mean is often used to report central tendencies, it is not a robust statistic,
meaning that it is greatly influenced by outliers (values that are very much larger or smaller than
most of the values). For skewed distributions, such as the distribution of income for which a few
people's incomes are substantially greater than most people's, the arithmetic mean may not
coincide with one's notion of "middle", and robust statistics, such as the median, may provide
better description of central tendency.

Geometric Mean

In mathematics, the geometric mean is a mean or average, which indicates the central


tendency or typical value of a set of numbers by using the product of their values (as opposed to
the arithmetic mean which uses their sum). The geometric mean is defined as the nth root of
the product of n numbers, i.e., for a set of numbers x1, x2, ..., xn, the geometric mean is defined as

For instance, the geometric mean of two numbers, say 2 and 8, is just the square root of
their product, that is,  . As another example, the geometric mean of the three
numbers 4, 1, and 1/32 is the cube root of their product (1/8), which is 1/2, that is, 

. The geometric mean applies only to positive numbers.


The geometric mean is often used for a set of numbers whose values are meant to be multiplied
together or are exponential in nature, such as a set of growth figures: values of the human
population or interest rates of a financial investment over time.

Comparing arithmetic mean and geometric mean

Geometric mean is the calculation of mean or average of series of values of product


which takes into account the effect of compounding and it is used for determining the
performance of investment whereas arithmetic mean is the calculation of mean by sum of total of
values divided by number of values.

The arithmetic mean is known as additive mean and are used in the everyday calculation
of returns. Geometric Mean is known as multiplicative mean and is a little complicated and
involves compounding.
Geometric mean can only be calculated for positive numbers and is always less
than geometric meanwhile, arithmetic mean can be calculated for both positive and
negative numbers and is always greater than the geometric mean.

Usage of arithmetic mean and geometric mean

Both Geometric Mean vs Arithmetic Mean are the tools to calculate the returns on

investment in finance and also used in other applications such as economics, statistics.

The arithmetic mean is calculated by dividing the sum of the numbers by number count.

However, Geometric means take into account the compounding effect during the calculation.

The geometric mean is the correct way to calculate the return on investment for a specific

time period Since the returns on investment for a portfolio over the years are interdependent.

However, the Arithmetic mean is better suited in the situation wherein variables being used for

calculation are not dependent on each other.

The arithmetic mean is more useful and accurate when it is used to calculate the average

of a data set where numbers are not skewed and not dependent on each other. However, in
the scenario where there is a lot of volatility in a data set, a geometric mean is more effective

and more accurate.

The arithmetic mean is relatively easier to calculate and use in comparison to the

Geometric mean, which is relatively complex to calculate.

The geometric mean is very widely used in the world of finance, specifically in

the calculation of portfolio returns. However, an Arithmetic mean is not an appropriate tool to

use in return calculation.

The Arithmetic mean of two numbers is always higher than the Geometric mean of the

same numbers.

Using the Arithmetic Mean-Geometric Mean Inequality in Problem Solving

The Arithmetic Mean-Geometric Mean Inequality (AM-GM Inquality) is a


fundamental relationship in mathematics.     It is a useful tool for problems solving and
building relationships with other mathematics.     It should find more use in school
mathematics than currently. 

The AM-GM for two positive numbers can be a useful tool in examining some
optimization problems.    For example, it is well known that for rectangles with a fixed
perimeter, the maximum area is given by a square having that perimeter.

Resources

1) https://en.wikipedia.org/wiki/Geometric_mean

2) https://en.wikipedia.org/wiki/Arithmetic_mean

3) https://www.wallstreetmojo.com/geometric-mean-vs-arithmetic-mean/
4) https://www.wallstreetmojo.com/geometric-mean-vs-arithmetic-mean/

5) https://www.educba.com/geometric-mean-vs-arithmetic-mean/

6) http://jwilson.coe.uga.edu/EMT725/AMGM/SSMA.Bnghm.html

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