6.5 Expected Value

Expected Value of a collection of outcomes is the sum of the products of the number of events’ (no two have outcomes in common) probabilities and their values.

E = p1x1 + p2x2 + p3x3+…pnx n

Multiply the outcome by the probability and add to find

the Expected Value.

Example 1

Each problem has 1 right and 2 wrong – 3 total. Probablity of guessing correctly is 1/3. Probability of guessing incorrectly is 2/3.

You win $10 for a correct answer and lose $ 6 for incorrect.

E = _____ (1/3) + _______(2/3) =

Example 2

-$7.48