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The geometric mean of a series of returns is always larger than the arithmetic mean, and the difference increases with the volatility of the series

The geometric mean of a series of returns is always larger than the arithmetic mean, and the difference increases with the volatility of the series

True

False

Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.

U.S. Government T-bills

2.75%

U.S. Long-term bonds

4.75%

What are the real rates of return for each of these securities? [formula: RRFR= ((1+ NRFR)/(1+ Rate of Inflation))-1

4.29% and 6.32%

1.23% and 4.29%

3.20% and 6.32%

1.23% and 3.20%

3.75% and 5.75%

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