Definition of expected value & calculating by hand and in Excel. Includes video. Find an expected value for a discrete random variable. The Calculate All Expected Value Statistics option on the SP Solver tab. One natural question to ask about a probability distribution is, "What is its center? " The expected value is one such measurement of the center. However, the main result still holds:. Use the table of values you calculated for all six die rolls, and multiply each value times the probability of 0. But if you were gambling, you would expect to draw a card higher than 6 heart symbole often than not. Eberly College of Science. If this question or a similar one is answered twice in this section, please click here to let us know. Expected Value of Perfect Information EVPI - is the absolute value of the difference between EV and WS. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Your explanations on here are clear cut and easy to follow. In other words, the function must stop at a particular value. This is in contrast to an unweighted average which would not take into account the probability of each outcome and weigh each possibility equally. There are many applications for the expected value of a random variable. Select the Correct Variable Type. You need to read the statistical calculation of the EV and make sense of it in real world terms, according to the problem. Lose your entire investment. The formal definition subsumes both of these and also works for distributions which are neither discrete nor continuous; the expected value of a random variable is the integral of the random variable with respect to its probability measure. We then add these products to reach our expected value. Set this number aside for a moment. Term life insurance and death probability. Then the expected value of this random variable is the infinite sum. Probability is the chance that each particular value or outcome may occur. This is a special case of Jensen's inequality. You would need to be provided with some additional information before you could calculate the probabilities in these examples.