Expected Return Calculator

Probability-weighted average of possible returns.

How the Math Works

The Expected Return Calculator determines the weighted-average anticipated return of an investment by multiplying each possible outcome's probability by its corresponding return, then summing all these values. This statistical approach accounts for the likelihood of various scenarios—such as best case, expected case, and worst case—giving greater weight to outcomes that are more probable to occur.

Practical Applications

To use this calculator, first identify all potential returns an investment might generate along with their estimated probabilities. Enter each probability-return pair into the calculator, ensuring probabilities sum to 100%. The tool then computes the weighted average, helping you quantify the average return you might expect over time given the risk profile of your investment.

Day-to-Day Use

This calculation empowers everyday investors to make informed decisions by translating uncertainty into a single, actionable metric. Whether evaluating a new job offer, planning retirement contributions, or choosing between investment options, knowing your expected return helps you allocate resources efficiently and align financial choices with your long-term goals.

FAQ