1. What is Expected Rate of Return?

The Expected Rate of Return (RoR) is a percentage that represents the anticipated profit or loss on an investment relative to the initial amount invested. It helps investors evaluate the potential profitability of a stock investment.

2. How Does the Calculator Work?

The calculator uses the Expected Rate of Return formula:

Where:

• \( Expected\ Price \) — The price you expect the stock to reach
• \( Current\ Price \) — The current price of the stock

Explanation: The formula calculates the percentage change between the expected future price and the current price.

3. Importance of Rate of Return Calculation

Details: Calculating expected rate of return helps investors compare different investment opportunities, assess risk versus reward, and make informed investment decisions.

4. Using the Calculator

Tips: Enter the current stock price and your expected future price in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good expected rate of return?
A: This depends on your investment goals and risk tolerance. Historically, the stock market averages about 7-10% annual return.

Q2: How accurate is this calculation?
A: The calculation is mathematically precise, but the accuracy depends on how realistic your expected price is.

Q3: Should I use this for short-term or long-term investments?
A: This calculation can be used for any time frame, but longer-term predictions are generally less reliable.

Q4: Does this account for dividends?
A: No, this is a price-only calculation. For total return, you would need to include expected dividends.

Q5: How does this relate to annualized return?
A: This shows the total return. To annualize it, you'd need to factor in the time period of your investment.