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Calculating EV and Coefficient of Variation: An Example

Expected Value is the Profit or Loss from a decision times the probably of that happening.

Example:

Box A has a 25% chance of giving you 30 dollars, a 50% chance of giving you 20 dollars, and a 25% chance of giving you 10 dollars.  It costs 15 dollars to buy box A, what is your expected value?

30-15=15 ; 15 x .25= $3.75

20-15= 5 ; 5 x .5 = $2.50

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