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Random Variables Lecture chapter 16 part A Expected value Standard deviation

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Expected Value (mean) Over the long haul how much to you expect to pay/get?

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Expected Value Credit unions often offer life insurance on their members. The general policy pays $1000 for a death and $500 for a disability. What is the expected value for the policy? The payout to a policyholder is the random variable and the expected value is the average payout per policy. To find E(X) create a probability model (a table with all possible outcomes and their probabilities..

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Probability Model Credit unions often offer life insurance on their members. The general policy pays $1000 for a death and $500 for a disability. What is the expected value for the policy? Out comePayout xP(X=x) Death Disability Neither 1,000 500 0 1 / 1000 2 / 1000 997 / 1000

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On a multiple-choice test, a student is given five possible answers for each question. The student receives 1 point for a correct answer and loses ¼ point for an incorrect answer. If the student has no idea of the correct answer for a particular question and merely guesses, what is the students expected gain or loss on the question? Suppose also that on one of the questions you can eliminate two of the five answers as being wrong. If you guess at one of the remaining three answers, what is your expected gain or loss on the question?

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Value at Risk (VaR) Chapter IX.

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