An investor calculated the percentages of each of three stock investments with payoffs as shown. Find the average payoff for the three stock investments. what should I use in this case to calculate the average?
2026-03-07 21:55:42.1772920542
should I use the mean or weighted mean in this example?
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If you know how much money is invested in each of the three investments, it makes sense to do a weighted average, with the weights coming from $\frac{A_i}{A}$, where $A_i$ is the amount of money invested in investment $i$, and $A$ is the total money invested, so that $A = A_1 + A_2 + A_3$
Otherwise you could do a simple equally weighted average (i.e. average payoff = $\frac{1}{3}(p_1 + p_2 + p_3)$, where $p_i$ is the payoff for investment $i$.