1. What is a Required Return Calculator?

Definition: This calculator determines the percentage return needed to achieve your expected value based on your initial investment.

Purpose: It helps investors evaluate investment opportunities by calculating the required rate of return to reach financial goals.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( R \) — Required return (percentage)
• \( E \) — Expected value (currency, e.g., USD)
• \( P \) — Initial investment (currency, e.g., USD)

Explanation: The difference between expected value and initial investment is divided by the initial investment and multiplied by 100 to get the percentage return.

3. Importance of Required Return Calculation

Details: Calculating required return helps investors assess whether an investment can meet their financial objectives and compare different investment opportunities.

4. Using the Calculator

Tips: Enter the expected future value and initial investment in USD. The initial investment must be greater than 0.

5. Frequently Asked Questions (FAQ)

Q1: What does a negative return mean?
A: A negative return indicates your expected value is less than your initial investment, meaning you expect to lose money.

Q2: Is this annualized return?
A: No, this calculates total return regardless of time period. For annualized return, you'd need to factor in the investment duration.

Q3: How does this differ from ROI?
A: This is essentially the same as Return on Investment (ROI) expressed as a percentage.

Q4: Should I include inflation?
A: For real return, you should adjust your expected value for inflation before calculation.

Q5: What's a good required return?
A: This varies by investor and risk tolerance. Compare with historical returns of similar investments.