Expected value

According to the probability of each potential outcome, expected value is a statistical concept that describes the typical outcome of a given event. Expected value can be used in a variety of contexts, such as gambling, finance, and decision-making.

In personal development, expected value can be a useful tool for making informed decisions and assessing risk. By calculating the expected value of different options, it is possible to estimate the likely outcomes and determine which option is most advantageous.

For example, imagine that you are considering two investment opportunities. Investment A has a 50% chance of returning £100 and a 50% chance of returning nothing. Investment B has a 25% chance of returning £200, a 50% chance of returning £100, and a 25% chance of returning nothing. To calculate the expected value of each option, you would multiply the probability of each outcome by the potential payoff, and then sum the results. The expected value of Investment A is £50, while the expected value of Investment B is £125. Based on these calculations, Investment B may be the more attractive option, as it has a higher expected value.



Expected value