Lesson 11-6 Odds and Expectation

Objectives: Compute the odds in favor of and against an outcome Compute odds from probability Compute probability from odds Compute expected value

A. Odds and Expectation

If an event E has a favorable outcomes and b unfavorable outcomes, then 1. The odds in favor of event E occurring = 2. The odds against event E occurring = Odds are used by casinos, racetracks, and other gambling establishments to determine the payoffs when bets are made or lottery tickets are purchased. Theyre also used by insurance companies in determining the amount to charge for premiums. Odds can be expressed as a fraction or a ratio. For example, the odds against Pittsburgh repeating as Super Bowl champion could be listed as , 9:1, or 9 to 1. In common usage, the phrase the odds of really means the odds against. So by setting Pittsburghs odds at 9:1, the oddsmakers are predicting that if the season were played 10 times, Pittsburgh would win the Super Bowl 1 time, and not win it 9 times.

1. A card is drawn from a standard deck of 52 cards. (a) Find the odds in favor of getting an ace. Video

(b) Find the odds against getting an ace.

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Lesson 11-6 Odds and Expectation

C. Expected Value
Another concept related to odds and probability is expectation, or expected value. Expected value is used to determine the result that would be expected over the long term in some sort of gamble. It is used not only for games of chance, but in areas like insurance, management, engineering, and others. The key element is that the events in question must have numerical outcomes. To find expected value, multiply the numerical result of each outcome by the corresponding probability of the outcome, then add those products. The expected value for the outcomes of a probability experiment is E = X1 P(X1) + X2 P(X2) + + Xn P(Xn) where the X s correspond to the numerical outcomes and the P(X)s are the corresponding probabilities of the outcomes.

4. When a single die is rolled, find the expected value of the outcome.

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5. One thousand tickets are sold at $1 each for a color television valued at $350. What is the expected value if a person purchases one ticket? Video

Lesson 11-6 Odds and Expectation

6. One thousand tickets are sold at $1 each for four prizes of $100, $50, $25, and $10. What is the expected value if a person purchases two tickets?

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7. With his house in foreclosure, a homeowner comes up with a plan to salvage the situation: he sells 10,000 raffle tickets at $50 each for the home, which is valued at $200,000. Find the expectation from buying one ticket. Video

Lesson 11-6 Odds and Expectation

8. While cleaning her dorm room, Monica mistakenly pushed three coins off the desk. When they land on the chair below, find the odds: Video

a. In favor of getting exactly three heads.

b. In favor of getting exactly three tails.

c. Against getting exactly two heads.

d. Against getting exactly one tail.

e. In favor of getting at least one tail.