In Market Indices TAB, Mean Rate/Arithmetic Mean corresponds to...

• A. Standard deviation signifies risk
• B. Straight CF projections
• C. Historical returns
• D. Monte Carlo analysis results; Monte Carlo acts independent to other indices; always greater than geometric mean/ROR

Answer: (D)

Mean Rate/Arithmetic Mean in the Market Indices tab is the average of the returns produced by Monte Carlo simulations. Monte Carlo analysis runs many independent scenarios for index performance, and the mean rate shown is simply the simple average of those simulated yearly returns. This value represents the expected simple return you would anticipate across the ensemble of scenarios, rather than a single historical outcome or a measure of risk.

The arithmetic mean tends to be higher than the geometric mean because it takes the plain average of yearly returns without compounding, whereas the geometric mean reflects the compounded growth rate across time. So the Monte Carlo mean rate will typically exceed the geometric mean (they would be equal only if all simulated returns were identical).

Why the other options don’t fit: standard deviation signals risk, not the average rate; straight cash-flow projections aren’t about the average return; historical returns would be the actual past average, not the Monte Carlo mean. Monte Carlo results are generated as independent scenarios, which is why the mean rate from those simulations captures that independent, averaged expectation.