Hi guys, anyone know how to work out expected value using the Texas BA II Plus, so using the STAT/DATA function to work out the below Expected value, then standard deviation of EV.
Probability EPS
10% £ 1.80
20% £1.60
40% £1.20
30% £1.00
Expected Value= 1.28. but how would you use the Texas BA to calculate EV and Stadard deviation/Variance???
This doesn’t work, because it excludes the probability weightings on each scenario. You need to manually incorporate them. Just run the calculation the “long way”.
[Prob(1)* ((EPS1 - MEANeps)^2)]
Do this for each case, summing, and you have the variance. Take the square root of the variance to arrive at the standard deviation. I got 0.0736 for the variance.
But clearly the calculator method does’t give the correct answers for the variance or the standard deviation.
The correct variance is 0.0736 while the standard deviation is 0.2713.
Your TI will give you the population standard deviation as 0.1118 and the sample standard deviation as 0.1291, neither is correct.
It gives the correct expected value under ‘summation (XY)’ because that is just the probability weighted average, which is the definition of expected value. You could do this much faster by just multiplying through.
In summary, no incremental benefit to using the calculator here. Standard approach seems to be the way to go.
This will help you in time. Most people don’t gain a strong understanding of anything by using shortcuts. You’ll be thankful you know the long way when you run into trouble with a shortcut. A (financial) calculator should make things easier for you, but it shouldn’t be a crutch-- the long way will be your friend forever (and can help you understand concepts and relationships between variables).