Calculate Stocks Expected Return
Note that although the simple average of the expected return of the portfolios components is 15 the average of 10 15 and 20 the portfolios expected return of 14 is slightly below that simple average figure. This is due to the fact that half of the investors capital is invested in the asset with the lowest expected return.
Expected Return Financial Management Financial Analysis Portfolio Management
Expected return is the amount of profit or loss an investor anticipates on an investment that has various known or expected rates of return.
. If you have a slightest of the hint regarding DCF then you would have heard about the Capital Asset Pricing Model CAPM CAPM The Capital Asset Pricing Model CAPM defines the expected return from a portfolio of various securities with varying degrees of riskIt also considers the volatility of a particular security in relation to the market. However the T-bill is generally accepted as the best representative of a risk-free security because its return. The expected return is the anticipated amount of returns that a portfolio may generate whereas the standard deviation of a portfolio measures the amount that the returns deviate from its mean.
Expected return on an asset r a the value to be calculated. Treasury billNo instrument is completely without some risk including the T-bill which is subject to inflation risk. Risk-free rate r f the interest rate available from a risk-free security such as the 13-week US.
It is calculated by multiplying potential outcomes by.
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