Statistics → Variable → Average → Expected Value

**Expectation (Expected Value)**

Expected value (or expectation) is simply the average of all possible outcomes.

**Example 1.** The price of a stock is $100. And, there are equal chances that after one year it could be $90, $110, $120 or remains the same.

**(a)** What is the expected value of the stock?

**(b)** What is the expected return from the stock?

**Solution (a)** As expected value is the average of all possible outcomes. Hence,

**Expected Return**

The expected return can be calculated using the formula

**Solution (b)**