Utilize our Expected Return Calculator to estimate the potential profit or loss on an investment or project. This essential tool helps investors and financial analysts quantify the average return an investment is expected to generate over a specific period, considering various outcomes and their probabilities. Make informed financial decisions and enhance your portfolio planning.
Formula:
The Expected Return (ER) is calculated by summing the products of each possible return (Ri) and its probability (Pi) for each scenario:
ER = ∑(Ri × Pi)
Where:
- Ri: The estimated return for a specific investment scenario (e.g., 8%).
- Pi: The probability of that specific scenario occurring (e.g., 30% chance).
- ∑: The summation of all possible scenarios, considering their respective returns and probabilities.