Answers » Categories » Banking

What is expected return and realized return?

What's the difference between expected return and realized return?


2 Answers

0 
Expected return means the return investors expect to realize if an investment is made. The expectation is based on the return of a risk free investment, such as a U.S. Treasury note, plus a risk premium. In case of a higher risk, a higher return is expected to compensate for the increased risk.

Realized return is the return actually earned by buying an asset. In efficient capital markets, expected and required returns are theoretically equal because everybody is well-informed, prices are always fair and perfectly represent the risk. But markets are usually not perfect, and unexpected events occur very often. Realized returns are not connected to expected returns.


0 
the anticipated return expected by investor over some future holding period is called expected return actual return on an investment for some previous period of time is called realized return

Answer this question

by Anonymous - Already have an account? Login now!
Your Name:

Your Answer:
Source(s): (optional)

Enter the text you see in the image below
What do you see?
Can't read the image? View a new one.
Your answer will appear after being approved.

Ask your own question