We invest $1,000 in a stock that has a 15% chance of a 1% return, a 60% chance of a 5% return and a 25% chance of a 7% return.
Given Probability1=15% Return 1=1% Probability 2=6 is expected return after one year.
Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. Use the following formula and steps to calculate the expected return of investment: Expected return = (return A x probability A) + (return B x probability B). First, determine the probability of each return that might occur. To do this refer to the historical data on past returns.
The expected rate of return also known as expected return is the profit or loss an investor expects from an investment given historical rates of return and the probability of certain returns under different scenarios. The expected return formula projects potential future returns.
Learn more about invest here
https://brainly.com/question/25300925
#SPJ4
