Expected monetary value may be defined as:

Question

Quizplus · Accepted Answer

Expected monetary value (EMV) is the weighted average of the possible monetary outcomes, with their respective probabilities serving as the weights. This means that the probability of each outcome occurring is multiplied by the monetary value of that outcome and then these products are summed up to arrive at the EMV. Therefore, option C is the correct definition of EMV. Options A and B only refer to the probabilities of the outcomes, while option D refers to the average of all possible outcomes, without considering their respective probabilities.

Expected Monetary Value May Be Defined As