Notes #4 Probability Distribution Continued!
Mean of a probability distribution: Multiply each outcome by the probability associated with it and find the sum.
Example: Rolling a single die
Outcome | 1 | 2 | 3 | 4 | 5 | 6 |
Probability | 0.17 | 0.17 | 0.17 | 0.17 | 0.17 | 0.17 |
Mean of the distribution: 1(.17) + 2(.17) + 3(.17) + 4(.17) + 5(.17) + 6(.17)= 3.57
1. Below is a table that gives the probabilities of obtaining exactly x heads in 4 throws.
x | P(x) |
0 | .0625 |
1 | .2500 |
2 | .3750 |
3 | .2500 |
4 | .0625 |
Find the mean:
2. Probability Distribution- The weather this weekend
Outcome | Probability |
Sunny | 80 % |
Rain | 10 % |
Snow | 9.99995 % |
Volcanic Ash | 0.00005 % |
The total must equal 100% Mean can't be calculated with non-number outcomes!
3. Probability Distribution - In Business
Economic Outcome | Probability | Return on Investment |
Great | 20% | 25% |
Good | 40% | 15% |
So-So | 30% | 5% |
Really Bad | 10% | 0% |
• Economic Outcome = What might happen next year to the country's overall economy.
• Probability = Estimate of the likelihood that the economy will be in each outcome.
• Return on Investment = Estimate of your profit in each economic outcome.
Find the mean: What does this mean for Return on Investment?