Weighted averagehardFree question
| Holding £m | Return % |
|---|---|
| 20 | 7% |
| 10 | 4% |
| 10 | 2% |
What was the fund's overall return, weighted by holding size?
A13.0%
B4.3%
C6.0%
D4.0%
E5.0%
Worked solution
Weight each group's value by its size: Σ(size × value) ÷ Σ(size). A simple mean of the group values is the classic error. The correct answer is 5.0%. Traps to avoid: 13.0% comes from the "summed returns" error; 4.3% comes from the "unweighted mean" error; 6.0% comes from the "dropped a group" error; 4.0% comes from the "median not mean" error.
The wrong answers here have names
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