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6.5 Expected Value

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 = p 1 x 1 + p 2 x 2 + p 3 x 3 +…p n x n Multiply the outcome by the probability and add to find

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6.5 Expected Value

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  1. 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.

  2. E = p1x1 + p2x2 + p3x3+…pnx n • Multiply the outcome by the probability and add to find • the Expected Value. • Example 1

  3. Example 2 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) =

  4. -$7.48

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