Canadian Securities Course (CSC) Level 2 Practice Exam

The formula for calculating the expected return for a portfolio or investment involves considering both the cash flows generated from that investment and any capital gains or losses it has experienced over a particular period. The correct approach encompasses adding the total cash flows to the total capital gains (or losses) and then dividing by the end value of the investment.

This method reflects the overall performance of the investment, as it combines both income-related components (cash flow) and changes in value (capital gains/losses) to arrive at a comprehensive understanding of the investment's return in relation to its end value.

In contrast to the other choices, the other options do not capture this holistic view of an investment's return. They either focus too narrowly on certain aspects of performance or use an incorrect methodological application. For example, considering only beginning value or separating elements without integrating them does not accurately reflect the return an investor would expect to receive.