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Section 13.4

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Section 13.4

Expected Value

- Compute expected value.
- Use expected value to solve applied problems.
- Use expected value to determine the average payoff or loss in a game of chance.

- Expected Value: a mathematical way to use probabilities to determine what to expect in various situation over the long run.
- Used to determine premiums on insurance policies, weigh the risks versus the benefits of alternatives in business ventures, and indicate to a player of any game of chance what will happen if the game is played repeatedly.

- The standard way to find expected value is to multiply each possible outcome by its probability, and then add these products.
- We will use EVto represent expected value.

- Determining if a game is fair:
- If a game has an expected value of 0, then the game is called fair.
- A game in which the expected value is not 0 is an unfair game.

- If a game has an expected value of 0, then the game is called fair.

- TB pg. 762/1

- TB pg.763/3

- TB pg.763/5

- TB pg.763/7

- TB pg.763/9

- TB pg.763/11

- TB pg.763/13
- 1st Calculate EV, Determine Fair, Determine Fair Price

- TB pg.763/15
- 1st Calculate EV, Determine Fair, Determine Fair Price

- TB pg.763/17
- Calculate EV

- TB pg.763/21
- Guessing

- TB pg.764/23
- Guessing

- TB pg.764/25
- Calculate EV

- TB pg.764/29
- Calculate Gain/Loss

- TB pg.764/31
- Calculate Profit

- Class work:
- TB pg. 763/2 – 32 Even
- Remember you must write problems and show ALL work to receive credit for this assignment.
- Class assignments are 40% of your grade.
- This assignment is due Friday, 12/02/11.

- Class assignments are 40% of your grade.

- Remember you must write problems and show ALL work to receive credit for this assignment.

- TB pg. 763/2 – 32 Even