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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Expected value
“Expected values will ignore any variability which could occur across the range of possible outcomes”
What does variability means in the statement above?
The spread (or difference) between the various possible outcomes.
For example if the outcomes are 49 or 51, each with a 0.5 probability of occurring, then the expected value is 50.
Similarly, if the outcomes are 10 or 90, each with a 0.5 probability of occurring, then the expected value is also 50.
Purely on expected values, the two are the same. However saying that they are the same is ignoring the fact that the possible outcomes in the second one have a much greater spread than the outcomes in the first one.
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