Reward to Risk Ratio Calculator
Reward to Risk Ratio Calculator
| Component | Description |
|---|---|
| Expected Return | The anticipated return on an investment. |
| Risk-Free Rate | The return on an investment with zero risk, such as government bonds. |
| Standard Deviation | A measure of the investment’s volatility or risk. |
| Reward to Risk Ratio | The ratio of the expected return above the risk-free rate to the investment’s standard deviation. |
| Formula | Reward to Risk Ratio = (Expected Return – Risk-Free Rate) / Standard Deviation |
| Purpose | Used to compare the potential return of an investment to its risk, aiding in investment decision-making. |