Blafarm, An investment has a 10% chance of a 10
Post# of 148176
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Posted On: 05/22/2020 6:59:43 PM
Blafarm,
This is correct, however does not take into account the NEGATIVE side of things; what if you lose ?? There exists something like negative results
. So this is not realistic.
This is what you expect to make per dollar in your investment, or, put in another way: ($20-$3.1)*0.8 =$13.52 upside potential vs ($3.1-$1.2)*0.2=$0.38 downside potential; your ME=$13.14 is what you EXPECT to make for every dollar you invest (accounting for he probability that your investment might not work out).
Quote:
An investment has a 10% chance of a 100% return and a 90% chance of a 50% return. The expected return is calculated as:
Expected Return = 0.1(1) + 0.9(0.5) = 0.55 = 55%.
This is correct, however does not take into account the NEGATIVE side of things; what if you lose ?? There exists something like negative results
. So this is not realistic. Quote:
Question:
What is the proper way to interpret (or equate) 1.5 dollars in your example vs. 12 dollars in my example?
This is what you expect to make per dollar in your investment, or, put in another way: ($20-$3.1)*0.8 =$13.52 upside potential vs ($3.1-$1.2)*0.2=$0.38 downside potential; your ME=$13.14 is what you EXPECT to make for every dollar you invest (accounting for he probability that your investment might not work out).
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