what is expected return 
the expected return is the profit or loss that an investor anticipates on an investment that has known historical rates of return ror it is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these results investopedia paige mclaughlinunderstanding expected returnexpected return calculations are a key piece of both business operations and financial theory including in the well known models of the modern portfolio theory mpt or the black scholes options pricing model 12 for example if an investment has a 50 chance of gaining 20 and a 50 chance of losing 10 the expected return would be 5 50 x 20 50 x 10 5 the expected return is a tool used to determine whether an investment has a positive or negative average net outcome the sum is calculated as the expected value ev of an investment given its potential returns in different scenarios as illustrated by the following formula 