# Section 13.4 - PowerPoint PPT Presentation

1 / 20

Section 13.4. Expected Value. Objectives. 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. Key Terms.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

Section 13.4

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

## Section 13.4

Expected Value

### Objectives

• 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.

### Key Terms

• 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.

### Expected Value:

• 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.

### Key Concept:

• 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.

• TB pg. 762/1

• TB pg.763/3

• TB pg.763/5

• TB pg.763/7

• TB pg.763/9

• TB pg.763/11

### Example 7:Calculations

• TB pg.763/13

• 1st Calculate EV, Determine Fair, Determine Fair Price

### Example 8:Calculations

• TB pg.763/15

• 1st Calculate EV, Determine Fair, Determine Fair Price

### Example 9:Roulette Wheel

• TB pg.763/17

• Calculate EV

• TB pg.763/21

• Guessing

• TB pg.764/23

• Guessing

### Example 12:Life Insurance

• TB pg.764/25

• Calculate EV

### Example 13:Expected Gain/Loss

• TB pg.764/29

• Calculate Gain/Loss

### Example 14:Expected Weekly Profit

• TB pg.764/31

• Calculate Profit

### Section 13.4 Assignment

• Class work:

• TB pg. 763/2 – 32 Even

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