PRC-2 · Chapter 11 · Question 14 of 60
When calculating expected values in a business scenario, how is the Expected Value (EV) mathematically derived?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) By multiplying each possible financial outcome by its respective probability of occurring, and summing the results.
Explanation
The expected value represents the weighted average of all possible outcomes, calculated by summing the products of each outcome and its associated probability.
More Probability Concepts MCQs
- Q16Which of the following is a mandatory mathematical requirement for any valid discrete probability distribution?
- Q17A discrete probability distribution describes outcomes that are:
- Q18In the context of a discrete probability distribution, the 'Expected Value' (E[X]) is mathematically synonymous with:
- Q19Which specific probability distribution is strictly characterized by having only two possible outcomes per trial (e.g., success or failure)?
- Q20Which of the following describes the shape of a perfectly normal distribution curve?