Understanding the Approximate Expected Return Equation The formula for the approximate expected return of an investment can look intimidating, but it's really just a function of three things: (1) average annual current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year period and enter the values into the bottom half of the table. Next, derive the correct formula for approximate expected return by correctly arranging these three variables in the equation that follows. Approximate Expected Return = Using this formula, you can see that the approximate expected return for 5tock 1 is and the approximate expected return for stock 2 is True of False: If both investments carry the same rate of risk, stock 2 is a better investment than 5 tock 1. True False