Mean, median and mode

There are several ways to calculate an average, the three most common being the mean, median and mode.

Averages are used all the time in finance, usually to justify performance (above average'). However, as an investor, youshould realise there are several ways to calculate an average.The three most common are the mean, median and mode.

First, you can calculate the mean. Let's say you have five FTSE 100 readings on consecutive days. They are 4,800, 4,900, 4,700, 4,800 and 5,100. The mean is the sum of the readings (24,300) divided by the number of readings (five). So that's 4,860.

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