EXPECTED RETURN

Amount an investor would expect on the return of an investment with various known or expected return rates. This is computed by getting the average of the probability distribution of all potential returns. For instance, if an individual invested in a stock with 50% chance of generating a 10% profit and 50% chance of getting a 5% loss, the expected return is 2.5% (0.5 x 0.1 + 0.5 x -0.05). However, since it is based on historical figures, this is not guaranteed.

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