6.5 expected value
DESCRIPTION
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 - PowerPoint PPT PresentationTRANSCRIPT
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