Expected value calculator
Expected value is the average result of a choice you could make many times: multiply each outcome by its probability and add them up. A bet with a negative expected value loses money over time, even though it sometimes pays. The probabilities must add up to 100%.
Outcomes
The probabilities add up to 100%.
Predict first
A $150 extended warranty covers a phone repair that costs $900. One phone in 10 needs it. Is the warranty worth buying, on average?
Worked example
A raffle sells 1,000 tickets at $5 each for one $2,000 prize. Is a ticket worth buying, on average?
- Win: $1,995 (the prize minus the ticket), with probability 1 in 1,000 = 0.1%.
- Lose: −$5, with probability 99.9%.
- Expected value = $1,995 × 0.001 + (−$5) × 0.999 = −$3.00.
Each ticket loses $3.00 on average: of every $5,000 the raffle takes in, it keeps $3,000.
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