What does expected value represent, and how is it calculated?
Instructor solution
Expected value gives you the long-term average outcome of an experiment. It may be a value which will never occur on any single trial. It is calculated by finding a weighted average of the numerical values of all possible outcomes, weighted by their respective probabilities.
Peer Responses
Think you've got it?
99% of the time, my company's website brings in $1,000 per day. If it gets hacked, which happens 1% of the time, the company will lose $100,000 per day. What is the expected value of this website for a single day?
- A.
$1000 - B.
$10 - C.
$100,000 - D.
$3,650
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