Financial Modeling Tutorials

- Excel Modeling
- Financial Functions in Excel
- Sensitivity Analysis in Excel
- Sensitivity Analysis
- Capital Budgeting Techniques
- Time Value of Money
- Future Value Formula
- Present Value Factor
- Perpetuity Formula
- Present Value vs Future Value
- Annuity vs Pension
- Present Value of an Annuity
- Doubling Time Formula
- Annuity Formula
- Present Value of an Annuity Formula
- Future Value of Annuity Due Formula
- Maturity Value
- Annuity vs Perpetuity
- Annuity vs Lump Sum
- Deferred Annuity Formula
- Internal Rate of Return (IRR)
- IRR Examples (Internal Rate of Return)
- NPV vs XNPV
- NPV vs IRR
- NPV Formula
- NPV Profile
- NPV Examples
- Advantages and Disadvantages of NPV
- Mutually Exclusive Projects
- PV vs NPV
- IRR vs ROI
- Break Even Point
- Break Even Analysis
- Breakeven Analysis Examples
- Break Even Chart
- Benefit Cost Ratio
- Payback Period & Discounted Payback Period
- Payback period Formula
- Discounted Payback Period Formula
- Payback Period Advantages and Disadvantages
- Profitability Index
- Feasibility Study Examples
- Cash Burn Rate
- Interest Formula
- Simple Interest
- Simple Interest vs Compound Interest
- Simple Interest Formula
- CAGR Formula (Compounded Annual Growth Rate)
- Growth Rate Formula
- Effective Interest Rate
- Loan Amortization Schedule
- Mortgage Formula
- Loan Principal Amount
- Interest Rate Formula
- Rate of Return Formula
- Effective Annual Rate
- Effective Annual Rate Formula (EAR)
- Compounding
- Compounding Formula
- Compound Interest
- Compound Interest Examples
- Daily Compound Interest
- Monthly Compound Interest Formula
- Discount Rate vs Interest Rate
- Discounting Formula
- Rule of 72
- Geometric Mean Return
- Geometric Mean vs Arithmetic Mean
- Real Rate of Return Formula
- Continuous compounding Formula
- Weighted average Formula
- Average Formula
- EWMA (Exponentially Weighted Moving Average)
- Average Rate of Return Formula
- Mean Formula
- Mean Examples
- Population Mean Formula
- Weighted Mean Formula
- Harmonic Mean Formula
- Median Formula in Statistics
- Range Formula
- Outlier Formula
- Decile Formula
- Midrange Formula
- Quartile Deviation
- Expected Value Formula
- Exponential Growth Formula
- Margin of Error Formula
- Decrease Percentage Formula
- Relative Change
- Percent Error Formula
- Holding Period Return Formula
- Cost Benefit Analysis
- Cost Benefit Analysis Examples
- Cost Volume Profit Analysis
- Opportunity Cost Formula
- Opportunity Cost Examples
- APR vs APY
- Mortgage APR vs Interest Rate
- Normal Distribution Formula
- Standard Normal Distribution Formula
- Normalization Formula
- Bell Curve
- T Distribution Formula
- Regression Formula
- Regression Analysis Formula
- Multiple Regression Formula
- Correlation Coefficient Formula
- Correlation Formula
- Correlation Examples
- Coefficient of Determination
- Population Variance Formula
- Covariance Formula
- Coefficient of Variation Formula
- Sample Standard Deviation Formula
- Relative Standard Deviation Formula
- Standard Deviation Formula
- Standard Deviation Examples
- Effect Size
- Sample Size Formula
- Volatility Formula
- Binomial Distribution Formula
- Multicollinearity
- Hypergeometric Distribution
- Exponential Distribution
- Central Limit Theorem
- Poisson Distribution
- Central Tendency
- Hypothesis Testing
- Gini Coefficient
- Quartile Formula
- P Value Formula
- Skewness Formula
- R Squared Formula
- Adjusted R Squared
- Regression vs ANOVA
- Z Test Formula
- Z Score Formula
- Z Test vs T Test
- F-Test Formula
- Quantitative Research
- Histogram Examples

Related Courses

## Examples of Mean

Mean is the most commonly used measure in central tendency. There are many examples of mean which can be calculated based on the availability and requirement of data – Arithmetic mean, weighted mean, Geometric Mean and Harmonic mean. Let us discuss these examples of mean in detail –

### Top 4 Examples of Mean

Below are the examples of the mean.

#### Example #1 – Arithmetic Mean

Suppose a set of data containing the following numbers:

8, 16, 15, 17, 18, 20, 25

We have to calculate the mean for the above set.

**Solution:**

**Arithmetic Mean = Sum of Total Numbers / Number of Values**

So, the calculation of arithmetic mean will be –

In this case it will be (8 + 16 + 15 + 17 + 18 + 20 + 25)/7 which comes to 17.

**Mean = 17**

This mean is simple arithmetic mean as none of the data in the sample are repeating i.e. ungrouped data.

#### Example #2 – Weighted Average Mean

In the above example, all the numbers are being given an equal weight of 1/7. Suppose if all the values have different weight then the mean will be pulled by the weight

Suppose Fin wants to buy a camera and he will decide among the available option based on their features as per the following weights:

- Battery Life 30 %
- Image Quality 50 %
- Zoom Range 20 %

He is confused among the two available options

**Option 1:**The Canon camera gets 8 points for Image Quality, 6 points for Battery Life, 7 points for zoom range.**Option 2:**The Nikon camera gets 9 points for Image Quality, 4 points for Battery Life, 6 points for zoom range

Which camera he should go for? The above points are based on 10 point ratings.

**Solution:**

The calculation of the total weighted average for canon will be –

**Total Weighted Average = 7.2**

The calculation of the total weighted average for Nikon will be –

**Total Weighted Average =6.9**

In this, we cannot calculate the mean of the points for the solution as weights are there for all the Factors.

4.9 (1,067 ratings)

It can be recommended based on the weighting factor of Fin that he should go for Canon camera as its weighted average is more.

#### Example #3 – Geometric Mean

This method of mean calculation is usually used for growth rates like population growth rate or interest rates. On one hand, arithmetic mean adds items whereas geometric mean multiplies items.

Calculate the geometric mean of 2, 3 and 6.

**Solution:**

It can be calculated using the formula of geometric mean which is:

**Geometric Mean ( X )=**

^{N}√(X_{1}*X_{2}*X^{3}………….X_{N})So geometric mean will be –

=(2 * 3 * 6)^1/3

**Mean = 3.30**

Calculate the geometric mean for following a set of data:

1/2, 1/5, 1/4, 9/72, 7/4

So geometric mean will be –

It will be calculated as:

(1/2 * 1/5 * 1/4 * 9/72 * 7/4)^1/5

**Mean = 0.35**

Suppose Fin’s salary jumped from $2500 to $5000 over the course of ten years. Using the geometric mean calculate his average yearly increase.

So, the calculation of geometric mean will be –

=(2500 * 5000)^1/2

**Mean = 3535.534**

The above mean is the increase over 10 years. Therefore, the average increase over 10 years will be 3535.534/10 i.e. 353.53

#### Example #4 – Harmonic Mean

Harmonic mean is another type of the numerical average which is calculated by way of dividing the number of observations available by reciprocal of each number present in the series. So in short harmonic mean is reciprocal of the arithmetic mean of reciprocals.

Let us take an example of two firms in the market High International Ltd and Low international Ltd. High International Ltd has the $ 50 billion market capitalization and $ 2 billion earnings. On the other hand, Low international Ltd has the $ 0.5 billion market capitalization and $ 2 million in earnings. Suppose one index is made by considering the stocks of the two companies High International Ltd and Low international Ltd with the 20% amount being invested in High International Ltd and rest 80% amount being invested in Low international Ltd. Calculate the PE ratio of the stock index.

**Solution:**

In order to calculate the PE ratio of the index, the P/E ratio of the two companies will be calculated firstly.

**P/E Ratio = Market Capitalization / Earnings**

So, the calculation of P/E ratio for High International Ltd will be –

P/E ratio (High International Ltd) = $ 50 / $ 2 billion

**P/E Ratio (High International Ltd) = $ 25**

So, the calculation of P/E ratio for Low International Ltd will be –

P/E ratio (Low International Ltd) = $ 0.5 / $ .002 billion

**P/E ratio (Low International Ltd)= $ 250**

Calculation of P/E ratio of index using

**#1 – Weighted Arithmetic Mean:**

**Weighted Arithmetic Mean = (Weight of investment in High International Ltd * P/E ratio of High International Ltd) + (Weight of investment in Low International Ltd * P/E ratio of Low International Ltd)**

So, the calculation of Weighted arithmetic mean will be –

Weighted Arithmetic Mean = 0.2 * 25 + 0.8 * 250

**Weighted Arithmetic Mean = 205**

**#2 – Weighted Harmonic Mean:**

**Weighted Harmonic Mean = (Weight of investment in High International Ltd + Weight of investment in Low International Ltd) / [(Weight of investment in High International Ltd / P/E ratio of High International Ltd) + (Weight of investment in Low International Ltd / P/E ratio of Low International Ltd) ]**

So, the calculation of Weighted Harmonic Mean will be –

Weighted Harmonic Mean = (0.2 + 0.8) / (0.2/25 + 0.8/250)

**Weighted Harmonic Mean = 89.29**

From the above example it can be observed that weighted arithmetic mean of the data significantly overestimates price-earnings ratio mean calculated.

### Conclusion

From the above-discussed mean examples, we can conclude the following –

- The arithmetic mean can be used to calculate the normal average if there is no weight for each value or factors. Its major disadvantage is that it is sensitive to extreme values especially if we are having a smaller sample size. It is not at all appropriate for skewed distribution.
- A geometric mean method is to be used when a value changes exponentially. Geometric mean cannot be used if any of the values in the data is zero or less than zero.
- The harmonic mean is to be used when small items have to be given greater weight. It is suitable for calculating the average of Rate, time, ratios, etc. Like Geometric mean harmonic mean is not affected by sample fluctuations.

### Recommended Articles

This has been a guide to Mean Examples. Here we discuss how to calculate mean with the help of practical examples along with a detailed explanation. You can learn more about finance from the following articles –

- Geometric vs Arithmetic Mean | Differences
- Explanation of Exponential Distribution
- Explanation of the Sample Size Formula
- Examples of Bill of Sale with Sample Templates
- Mean vs Median – Compare
- Calculate Weighted Average in Excel
- AVERAGE Excel Function
- Weighted Average Cost of Capital Calculation

- 250+ Courses
- 40+ Projects
- 1000+ Hours
- Full Lifetime Access
- Certificate of Completion