What Is Expected Value?

There's a 25 % chance of the number one scenario happening, you having the best hand and win. If it does, you'll win 500 dollars; there's a 75% chance that you have the worst hand and lose. To determine the e v, we multiply the probability by the outcome for each scenario and add them up. E v equals 125 dollars plus minus 75 dollars. The expected value is 50 bucks. It means if we were to play out this exact situation a million times, we should expect to win on average 50 dollars per situation. A negative e v investment decision is one that you should always consider passing on.