Expected Value (Noun)
Meaning
The sum of the values of a random variable divided by the number of values.
Classification
Nouns denoting cognitive processes and contents.
Examples
- The expected value is calculated by dividing the sum of the possible outcomes of a random variable by the total number of outcomes.
- To determine the average return on investment, investors use the concept of expected value to evaluate potential risks and rewards.
- The insurance company uses the concept of expected value to determine the appropriate premium for a policy based on the likelihood of claims.
- A roulette player calculated the expected value of betting on red versus black to make an informed decision about their wager.
- In decision theory, the expected value is used to compare the potential outcomes of different choices and select the one with the highest average value.