Question

You have calculated that the expected annual return for a stock is 8%. Will this figure be the same as your actual return? Explain

Answer 1

Expected annual return is based on the future Expectations of income of the company. These expectations which give rise to the expected annual return, and not the real figure. If the actual performance of the company outperforms expected performance the actual return can be higher than the expected return. If the actual performance is lower than the expected performance the actual return will be lower than expected return. Hence, the actual return can be different from the expected annual return of 8%.

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