Given the Possible Outcomes to a Lottery Being Only the Values

question 45

Multiple Choice

Given the possible outcomes to a lottery being only the values 2, 6 with equal probabilities, calculate the expected value, variance and standard deviation?

• A)EV = 4, variance = 16, standard deviation = 4
• B)EV = 4, variance = 4, standard deviation = 2
• C)EV = 4, variance = 4, standard deviation = 4
• D)EV = 3.5, variance = 4, standard deviation = 2

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Definitions:

Premium

A premium refers to the additional amount paid for a product, service, or insurance policy over and above its basic cost.

Risk Reduction

Strategies or actions taken to decrease or mitigate the level of risk.

Expected Value

A statistical measure that calculates the average outcome of a random variable or process, factoring in all possible values and their probabilities.

Efficient Allocation

The distribution of resources in such a manner that it's impossible to improve anyone's condition without worsening someone else's.