On Wed, 25 Jul 2007 17:28:00 -0700, Biff
wrote:

Hi Jerry,

I noticed my last reply didn't go through. I am trying to calculate the
annualized rate of return for a portfolio over 3 years. If after year 1 the
return is +25%, year 2 -25% and year three +25%, the arthemetic mean gives me
8.33% which is not reality, while the geometric mean is 5.4%. The
multiplication of the the returns plus one should be positive before taking
the nth root. Does this make sense?

Biff


To handle this problem, Biff, you merely add 1 to your percentage changes, and
then subtract 1 from the result.

So your series is

1.25
0.75
1.25

You can also do this within a single **array** formula

e.g.

K1: 25%
K2: -25%
K3: 25%

=GEOMEAN(1+K1:K3)-1

(array-entered)


--ron