Assume that you assign the following subjective probabilities for your final grade in your econometrics course (the standard GPA scale of 4 = A to 0 = F applies): $$\begin{array} { | c | c | }
\hline \text { Grade } & \text { Robability } \
\hline \text { A } & 0.20 \
\hline \text { B } & 0.50 \
\hline \text { C } & 0.20 \
\hline \text { D } & 0.0 B \
\hline \text { F } & 0.02 \
\hline
\end{array}$$ The expected value is:
A)3.0
B)3.5
C)2.78
D)3.25

Question

Assume that you assign the following subjective probabilities for your final grade in your econometrics course (the standard GPA scale of 4 = A to 0 = F applies): $$\begin{array} { | c | c | } 
\hline \text { Grade } & \text { Robability } \
\hline \text { A } & 0.20 \
\hline \text { B } & 0.50 \
\hline \text { C } & 0.20 \
\hline \text { D } & 0.0 B \
\hline \text { F } & 0.02 \
\hline
\end{array}$$ The expected value is:
A)3.0
B)3.5
C)2.78
D)3.25

Quizplus · Accepted Answer

The expected value (EV) is calculated by multiplying each grade's value by its probability and summing these products: EV = (4*0.20) + (3*0.50) + (2*0.20) + (1*0.0) + (0*0.02) = 0.8 + 1.5 + 0.4 + 0 + 0 = 2.7. The correct calculation results in 2.7, but since that option is not available and assuming a minor calculation or typographical error in the question or options, the closest provided option is C) 2.78.

Assume That You Assign the Following Subjective Probabilities for Your