How to Calculate the Variance of a Discrete Random Variable

Variance measures the amount of variability present in a statistical distribution. A discrete random variable can have only integer values. It represents things that can be counted, such as how much money you have, how many times a coin toss comes up heads, or the number of pages in a book. Use a discrete probability distribution when you know all the possible outcomes of a test and the probability of each one occurring; you need these values to calculate the statistical parameters for the distribution.

Instructions

    • 1

      Multiply each possible value of the variable by the probability of it occurring and add all these values together to find the mean of the discrete random variable. For example, if a wallet contains $1, $5 and $20 bills and the probabilities of pulling one of them out of the wallet are 0.5, 0.4 and 0.1, respectively, the mean is 0.5*$1 + 0.4*$5 + 0.1*$20 = $4.50.

    • 2

      Subtract the mean value from the first possible value, square the result, then multiply by the probability of that value occurring. For the $1 bills, for example, [($1 - $4.50)^2]*0.5 = $6.125. Repeat the procedure for all the other possible values; in this case, [($5 - $4.50)^2]*0.4 = $0.10 and [($20 - $4.50)^2]*0.1 = $24.025.

    • 3

      Sum all the values you calculated to find the variance of the discrete probability distribution. For example, the variance of $1, $5 and $20 bills with probabilities of 0.5, 0.4 and 0.1 is $6.135 + $0.10 + $24.025 = $30.26.

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