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):

Grade Probability
A 0.20
B 0.50
C 0.20
D 0.08
F 0.02

The expected value is:______

a. 3.5
b. 3.25.
c. 2.78.
e. 3.0

Answer 1

Option C) 2.78

Explanation:

We are given the following in the question:

Grade: A B C D F

Value: 4 3 2 1 0

Probability: 0.20 0.50 0.30 0.08 0.02

We have to find the expected value.

Formula:

`E(x) = \displaystyle\sum x_iP(x_i)\\\\E(x) = 4(0.20) + 3(0.50) + 2(0.20) + 1(0.08) + 0(0.02)\\\\E(x) =2.78`

Thus, the correct answer is

Option C) 2.78