Consider a lottery with four equally likely outcomes, A, B, C, and D. The associated payoffs are: $10, $30, $70, and $150, respectively. The expected value of this lottery is
A) $30
B) $65
C) $130
D) $260

Question

Quizplus · Accepted Answer

The expected value is calculated by multiplying each outcome by its probability and summing the results: (1/4)*$10 + (1/4)*$30 + (1/4)*$70 + (1/4)*$150 = $65.

Consider a Lottery with Four Equally Likely Outcomes, A, B