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How to Calculate Expected Value in Excel

A probability distribution tells us the probability that a random variable takes on certain values.

For example, the following probability distribution tells us the probability that a certain soccer team scores a certain number of goals in a given game:

To find the expected value of a probability distribution, we can use the following formula:

Î¼ = Î£x * P(x)

where:

• x: Data value
• P(x): Probability of value

For example, the expected number of goals for the soccer team would be calculated as:

Î¼ = 0*0.18Â  +Â  1*0.34Â  +Â  2*0.35Â  +Â  3*0.11Â  +Â  4*0.02Â  =Â Â 1.45 goals.

The following example provides a step-by-step example of how to calculate the expected value of a probability distribution in Excel.

Step 1: Enter the Data

First, letâ€™s enter the data values and corresponding probabilities for a given probability distribution:

Step 2: Multiply Values and Probabilities

Next, weâ€™ll multiply the first number in the â€˜Valuesâ€™ column with the first number in the â€˜Probabilityâ€™ column:

Weâ€™ll then copy and paste this formula down to every cell in column C:

Step 3: Calculate Expected Value

Lastly, we can calculate the expected value of the probability distribution by using SUM(C2:C10) to sum all of the values in column C:

The expected value for this probability distribution is 3.3.