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Dear sir,
I do have watched your lectures concerning risk and uncertainty but still have some issues.
In example 1, concerning expected values, I do have understood the arithmetic but not the logic. What’s the logic behind, for example, “2900 x 0.2”?
Thanks.
Suppose there is a 0.1 probability of getting 100, and a 0.9 probability of getting 200.
It means that out of 10 times, then 1 will give 100 and 9 will give 200.
So the total for 10 times is (1×100) + (9×200) = 1900.
Therefore the average each time is 1900/10 = 190(Doing (0.1 x 100) + (0.9 x 200) = 190, is doing the same thing)
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