Calculating expected value involves:
A) estimating how likely different outcomes are, and estimating the financial implications of each outcome.
B) predicting the most likely outcome and assuming that that event will occur.
C) assuming the worst outcome will occur and evaluating the financial implication of that outcome.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

To calculate expected value, one must estimate the likelihood of different outcomes and their financial implications. Simply assuming the most likely or worst outcome is not enough to accurately calculate expected value.

Calculating Expected Value Involves