What is the 'arithmetic mean'? Definition & meaning

The sum of a set of numbers added together and then divided by the total amount of numbers in that set.

‘Arithmetic mean’ is a fancy way of saying ‘mean’ or ‘average.’

To find the arithmetic mean, you add together a set of numbers and then divide your answer by the amount of numbers you had in that original set.

This may sound wordy - especially for math-o-phobes - but it’s really simple.

Take 1,2,3,4,5 as a set of numbers.

1+2+3+4+5 =15

In our original set, there were 5 numbers. So to get the average we just do….

15 ÷ 5 = 3

Simples.

More terms

Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.

Time Value of Money

The concept that money you have now is more valuable than the same sum in the future.

Year to Date (YTD)

A period of time that starts with the first day of the current calendar year and ends with today.

Gross Margin

The difference between a company's revenue and the cost to produce its goods/services, divided by revenue.

Balance sheet

A summary of a company's finances, including its assets, liabilities and shareholder equity.

Hedge Fund

Investment funds that are often associated with riskier and shorter-term trading strategies.

Net asset value

Mutual funds and investment trusts are priced on their net asset value (NAV).

Compound interest

Understand what compound interest means and how it's calculated

Margin call

Learn what a margin call stands for in financial terms.

Arithmetic Mean