How to Calculate Expected Return
Calculate probability-weighted expected return of an investment across multiple scenarios.
The Formula
E(R) = Sigma(probability * return)The expected return formula uses the mathematical relationship: E(R) = Sigma(probability * return). Each variable in the formula represents a measurable quantity that affects the final result.
Step-by-Step Method
- 1Identify all input values needed for the expected return calculation.
- 2Substitute your known values into the formula: E(R) = Sigma(probability * return).
- 3Perform the arithmetic operations in the correct order (PEMDAS/BODMAS).
- 4Check that your result has the correct units and is within a reasonable range.
- 5Verify using the interactive Expected Return Calculator to confirm your answer.
Related Topics
expected returnprobabilityportfoliostocks
Use the Interactive Calculator
Skip the manual math — get instant results with our free Expected Return calculator.