Expected Value & Fair Price

Expected Value is the sum of the products of the probabilities with their values.This time the formula may be easier to read, but we will keep it simple. We could have any number of probabilites, but we will just use 6. Where Pn is the nth probability, and An is the nth amount or value.

Expected Value = P1*A1+P2*A2+P3*A3+P4*A4+P5*A5+P6*A6

The following video goes over Expected Value and is about 4.5 minutes.

Fair Price is the price that really should be charged

Fair Price = Expected Value + Amount Paid

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