Expected Return Calculator
Calculate expected return using probability-weighted outcomes.
Enter up to 4 scenarios with probabilities and returns to find the probability-weighted average.
Expected return is the probability-weighted average of all possible outcomes. It tells you the return you should anticipate on average if you ran the same investment decision many times.
E(R) = p1 x r1 + p2 x r2 + p3 x r3 + …
Where p is the probability of each scenario (as a decimal) and r is the return in that scenario. The probabilities must sum to 1 (100%).
Example: a stock has three scenarios. A bull case (30% probability, +40% return), a base case (50% probability, +10% return), and a bear case (20% probability, -25% return).
E(R) = 0.30 x 40 + 0.50 x 10 + 0.20 x (-25) = 12 + 5 - 5 = 12%
That 12% is not what any single scenario delivers. It is the average across all of them, and no individual outcome is anywhere near it. The distinction matters more than it looks. An investment with a 90% chance of returning 5% and a 10% chance of losing everything has an expected return of -5.5%, negative even though the likely outcome is a gain.
The number the expected value hides. Two investments can share an expected return of 10% and be nothing alike. One returns between 8% and 12%; the other returns 60% or loses 40%. The standard deviation of the scenarios is what separates them, and this calculator reports it alongside the mean:
Variance = Σ p × (r - E(R))² Standard deviation = √Variance
Divide the standard deviation by the expected return and you get the coefficient of variation, which is risk per unit of return and is the honest way to rank two opportunities of different sizes. Lower is better.
Expected return also sits at the center of the Capital Asset Pricing Model, where the market price of risk determines what you should demand from a given level of systematic exposure.
The limitation is worth stating plainly. Expected value is a long-run idea, and it says nothing about a single bet. A 50% chance of doubling your money against a 50% chance of losing all of it has an expected return of 0%, and almost nobody should take it with money they need. Half the time you are wiped out, and being wiped out is not something you get to average out over a lifetime.
Enter your scenarios below. Probabilities should add up to 100%.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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