An employee had the following percentage increases in salary over the last 5 years: 4%, 7%, 10%, 15%, 12%. The geometric mean of his salary increases equals
________.
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A. B. C. D.D
The straight geometric mean of the increases is (0.04*0.07*0.1*0.15*0.12)^(1/5) = 8.72%. Note that this is different from geometric rate of change, which in this case would be (1.04*1.07*1.1*1.15*1.12)^(1/5) - 1 = 9.53%. You should be very careful about this point since the Mason & Lind textbook is quite ambiguous on this point. Finally, note that the geometric mean may not be defined if some of the salary changes are negative.