CFA CFA Level 1 Calculating Geometric Mean Return with the BA II Plus

# Calculating Geometric Mean Return with the BA II Plus

• Author
Posts
• DR515
Participant
• Undecided
275

So I’m having some trouble getting the correct answer to the following problem in the level 1 reading: The returns for the 5 periods are as follows…. 15%, -5%, 10%, 15%, 3%. In using the BAII Plus I am multiplying all of the returns (1.15)*(0.95)*(1.10)*(1.15)*(1.03) = 1.4235 I then press the y/x button and hit 5 but I get 5.8445 and I subtract one to get 4.85 and I should according to the example in the reading be getting 0.0732 or 7.32%.

Basically I could use some help clarifying how to use the BAII plus to calculate the geometric mean return!

Thanks

• LeChiffre
Participant
• CFA Level 2
9

1.4235 [y^x] (1/5) = 1.0732 – 1 = 7.32%

The key here is to raise the number you get after multiplying period returns to (1/n, n = number of periods, in this case 5, resulting in 0.20). This should help.

• DR515
Participant
• Undecided
1

Excellent Thank you:)