Question 2 (page 614)
Can some1 please explain how longterm growth rate in labour productivity was calculated. The fine print states that it was calculated using geometric mean but i am not getting their answer.
China 95 to 05. 6.7%
05 to 09. 10.3% (Geometric mean = 6.7x 10.3^ (1/2)) = 8.3% but CFA answer= 7.5%
Have you accounted for the number of years? The time weighted mean is 7.72% which is closer to the cfa answer. I’m unsure how to weight the rates for time when using the geometric mean.
Does anyone have any ideas? I agree, it has to be something with treating each period different because of lengths, but can’t figure it out.
I suppose they calculated it as follows: 9 years 6.7% 4 years 10.3% = 13 years in total -> ((1.067^9)*(1.103^4))^(1/13) = 1.07515 -> 7.5%
Noted. Thx guys
Came across this problem today and was asking myself the same question - thank you!