1) You have found out that over the last three years, house prices in your area have increased as

follows:

Year Increase %

2003 10%

2004 20%

2005 25%

What has been the average growth rate over the past 3 years?

2) In three successive years the return on an investment is 5%, 20%, and -4%. Calculate the

average rate of return.

3) Below are the EPS figures for CWM Chemicals Ltd for the past 10 years in chronological order.

R1.47, R1.84, R2.01, R1.57, R1.87, R2.66, R3.95, R0.22, R1.67, R1.27

a) Calculate the average growth rate using the Geometric Mean principle.

b) Calculate the average growth rate using the Arithmetic Mean principle.

c) What would account for the difference and which one is the correct figure?

d) How can you verify that your answer is correct in (c)?