Question

What is the expected rate of return formula?​

Answer 1

Explanation:

is calculated by taking the average of the probability distribution of all possible returns. For example, a model might state that an investment has a 10% chance of a 100% return and a 90% chance of a 50% return. The expected return is calculated as: Expected Return = 0.1(1) + 0.9(0.5) = 0.55 = 55%.