Difference between revisions of "Expected return"
Jump to navigation
Jump to search
| Line 7: | Line 7: | ||
:= 2.5% | := 2.5% | ||
| − | {{Template: | + | {{Template:Economic preparedness topics}} |
| − | [[Category: | + | [[Category:Economic Preparedness]] |
[[Category:Economics]] | [[Category:Economics]] | ||
[[Category:Statistics]] | [[Category:Statistics]] | ||
Revision as of 02:45, February 23, 2015
The expected return is the average of the possible returns, each weighted by its probability.
For example, if an investment has a 50% chance of earning a 5% return, a 25% chance of earning 10% and a 25% chance of losing 10%, then its expected return would be calculated as follows:
- Expected Return = (0.5) (0.05) + (0.25) (0.1) + (0.25) (-0.1)
- = .025 + .025 - .025
- = 2.5%
