Probability and Random Processes

Lecture 15
 Outline
• Expected Value of a R. V
• Mean and Variance
• Standard Deviation
• The use of mean, variance and standard
deviation

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 2

 Expected Value (1/2)
• The expected value of a discrete random variable
is the probability-weighted average of all possible
values
• In other words, each possible value the random
variable can assume is multiplied by its
probability of occurring, and the resulting
products are summed to produce the expected
value
• The expected value is also known as the
expectation, mathematical expectation, EV,
average, mean value, mean, or first moment

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 3

 Expected Value (2/2)
• If f(x) is the p.m.f. of the discrete random variable
X with sample space S, and if the summation:
 u ( x) f ( x)
xS

• exists (that is, it is less than ∞), then the resulting

sum is called the mathematical expectation, or
the expected value of the function u(X).
• The expectation is denoted E(X) or by μ. And is
given as:   E ( x)   Xf ( x)
xS

u ( x)  X
EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 4
 Practice Problem 1
• What is the expected value of a fair six-sided
die?

• Answer is 3.5

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 5

 Practice Problem 2
• Suppose an individual plays a gambling game
where it is possible to lose $1.00, break even,
win $3.00, or win $10.00 each time he plays
• There are 30% chance of losing, 40% break
even, 20% of winning $3 and rest are winning
$10.
• Find the average chance of winning.

• Answer is 0.8
EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 6
 Practice Problem 3
• We have weighted a 6 sided die in such a way
that chance of getting a 6 are 50% and rest of
the values are equally probable.
• Find the mean of each roll.

• Answer is 4.5

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 7

 Practice Problem 4
• Suppose that we are running a gambling house business
which has a fair roulette wheel containing 38 numbers: zero
(0), double zero (00), and the numbers 1, 2, 3, ..., 36.
Let X denote the number on which the ball lands and u(X)
denote the amount of money paid to the gambler, such
that:
u(X) = $5 is X = 0
u(X) = $10 is X = 00
u(X) = $1 is X = even number
u(X) = $2 is X = odd number
• How much should we charge for each roll in order to make
some profit?

• Answer is atleast $1.82 for each roll

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 8

 Variance (1/2)
• Find the means of the following two PMFs

• The mean of both the PMFs is same

• So only the mean is just not enough to
summarize the PMF
• We need another parameter which is called
variance

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 9

 Variance (2/2)
• The variance is a measure of dispersion of the
possible values of the random variable around
the expected value
– On average how far are the value from the mean
value
• The variance is denoted by sigma square (2)
• The variance itself is defined in terms of two
expectations
– It is the expected value of the squared deviation of
the variable's value from the variable's expected value
  Var ( x)  E ( X )  E ( X )
2 2

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 10

 Variance (3/3)
• To calculate the Variance:
– Square each value and multiply by its probability
– Sum them up and we get E(X2)
– Then subtract the square of the Expected Value μ

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 11

 Practice Problem 5
• Calculate the variance of a weighted die in
which the probability of getting a six is 0.5 and
all other values are equally probable.

• Answer is 3.25

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 12

 Practice Problem 6
• Calculate the variances of the following PMFs

• The answers are 0.6 and 8.4

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 13

 Standard Deviation (1/2)
• The positive square root of variance is called
standard deviation
   2

• Standard deviation is a number used to tell how

measurements for a group are spread out from
the average (mean), or expected value
– A low standard deviation means that most of the
numbers are very close to the average
– A high standard deviation means that the numbers are
spread out

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 Standard Deviation (2/2)
• Standard deviation may serve as a measure of
uncertainty
• In science, for example, the standard deviation of a
group of repeated measurements helps scientists know
how sure they are of the average number
• When deciding whether measurements from an
experiment agree with a prediction, the standard
deviation of those measurements is very important
• If the average number from the experiments is too far
away from the predicted number (with the distance
measured in standard deviations), then the theory
being tested may not be right

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 15

 The use of Mean, Variance and
Standard Deviation
• Any distribution can be completely
understood by it mean and standard deviation
• The variance is necessary to calculate the SD
• The average (mean) and the standard
deviation of a set of data are usually written
together
• Then a person can understand what the
average number is and how widely other
numbers in the group are spread out
EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 16
 Practice Problem 7
• Suppose that you want to open a certain type of business in
Faisalabad City and you have the following past data for the
same business
Percentage Yearly Earning Comment
20% 50,000 Loss
30% 0 Balance
40% 50,000 Profit
10% 1,50,000 Profit

• Find the average profit/loss per year and the amount of risk
involved

• Average Profit per year is 25,000 with a risk factor of 56,000

EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 17
 Application Examples
• Weather
– Average daily temperature of two cities (inland and
coastal) may be same but the standard deviation of
the daily high temperature for the coastal city will be
less than that of the inland city
• Sports
– In racing a driver with a low standard deviation of lap
times is more consistent than a driver with a higher
standard deviation
• Money/Business
– In money/business, standard deviation may indicate
the risk that a price will go up or down
EE319 - PRP Course Instructor: Muhammad Sajid Iqbal 18