How do you calculate the expected rate of return?


A simple way to calculate the expected rate of return on an investment for a single period is by subtracting the initial investment from the final value of the investment and dividing it with the initial investment. There also also other formulas to calculate expected rate of return on a multiple period average. Rate of return can be defined as the ratio of money gained or lost basing on an investment.
Q&A Related to "How do you calculate the expected rate of return..."
1. Understand the expected rate of return formula. Like many formulas, the expected rate of return formula requires a few "givens" in order to solve for the answer. The
To calculate the rate of return, take your return minus the capital and divide that by the capital, then multiply that times 100% and what you end up with is the rate of return. (
1. Determine the cost of the original investment. This is the total cost, including transactions fees or any other cost of acquisition. 2. Determine the return for at least two different
1. Determine the present value of the perpetuity. This is the amount of money you pay today to get returns every month, starting from next month's return into perpetuity. For example
1 Additional Answer Answer for: how to calculate expected rate of return
How to Calculate Expected Rate of Return
When it comes to making financial investments, investors want to know how much money they will make off the principal they invested. That might seem like a tall order: investors are somewhat at the mercy of the marketplace. However, by calculating the... More »
Difficulty: Moderately Easy
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