Take a look back at Figure 10.4. There we showed the value of a $1 investment after 95 years. Use the value for the large-company stock investment to check the geometric average in Table 10.3.

Table 10.3

In Figure 10.4, the large-company investment grew to $10,944.66 over 95 years. The geometric average return is thus:

This 10.3 percent is the value shown in Table 10.3. For practice, check some of the other numbers in Table 10.3 the same way.

Figure 10.4

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Series Small-company stocks Large-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation Geometric Mean 11.9% 10.3 6.2 5.7 5.1 3.3 2.9 Arithmetic Mean 16.2% 12.2 6.5 6.1 5.3 3.3 2.9 Standard Deviation 31.3% 19.7 8.5 9.8 5.6 3.1 4.0