Suppose Joe and Leo both face the following individual loss distribution: Probability of Loss ( i )
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Question:
Suppose Joe and Leo both face the following individual loss distribution:
Probability of Loss (i) Amount of Loss (Li)
0.7 $0
0.2 $40
0.1 $60
Determine the expected loss faced by Joe and Leo on an individual basis. Expected value of loss = iLi = 1L1 + 2L2 + 3L3, where
- Li: Value of the ith outcome
- i: Probability of the ith outcome
The expected loss is $______.
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