1. What Is The Expected Range Of Return?

The Expected Range of Return is a statistical measure that estimates the potential variation in investment returns using mean return, standard deviation, and z-score. It provides a confidence interval for investment performance predictions.

2. How Does The Calculator Work?

The calculator uses the expected range formula:

Where:

• \( Mean\ Return \) — Average expected return percentage
• \( Z \) — Z-score representing confidence level
• \( SD \) — Standard deviation measuring return volatility

Explanation: The formula calculates the range within which returns are expected to fall with a specified confidence level, accounting for investment volatility.

3. Importance Of Expected Range Calculation

Details: Calculating expected range helps investors understand potential return variability, assess risk, set realistic expectations, and make informed investment decisions based on statistical probabilities.

4. Using The Calculator

Tips: Enter mean return as percentage, z-score (1.96 for 95% confidence, 1.645 for 90%, 2.576 for 99%), and standard deviation as percentage. All values must be valid numerical inputs.

5. Frequently Asked Questions (FAQ)

Q1: What is a z-score and how do I choose it?
A: Z-score represents confidence level in standard deviations. Common values: 1.645 (90% confidence), 1.96 (95% confidence), 2.576 (99% confidence).

Q2: How is standard deviation calculated for investments?
A: Standard deviation measures return volatility and is typically calculated from historical return data as the square root of variance.

Q3: What does a wider expected range indicate?
A: A wider range indicates higher volatility and greater uncertainty in returns, suggesting higher investment risk.

Q4: Can this calculator be used for different time periods?
A: Yes, but ensure mean return and standard deviation are calculated for the same time period (monthly, quarterly, annually).

Q5: What are limitations of this calculation?
A: Assumes normal distribution of returns, may not capture extreme market events (fat tails), and relies on historical data which may not predict future performance.