Is the lowest hour exam grade dropped?

Not exactly. The effect of the grading procedure is to replace your lowest hour exam score by the final exam score but only if that will help.

Here is what the syllabus actually says:

Each exam and quiz has a maximum score of 100. You have four hour exams and a final: Five exams in all. Compute your final score as follows:
  1. Total the highest four of your five exam scores.
  2. Add twice your final exam score.
  3. Add your quiz average (including Forum points)
  4. Divide the result by seven.

Step 1 is where any replacement happens. If your final exam score is your lowest, then this first step just adds up all of your hour exams. If your final exam score is not your lowest, then it replaces your lowest hour exam score in the sum.

Notice that the number of scores counted is not changed and there is no actual change in any of your hour exam scores listed in the Student Gradebook.

For example, suppose that your scores are as follows:
exam 1:  80
exam 2:  70
exam 3:  30
exam 4:  90
final:  75
quiz:  100

Step 1:  80+70+90+75 = 315   (Notice that the 30 is gone!)
Step 2:  315 + 2×75 = 465
Step 3:  465 + 100 = 565
Step 4:  565/7 = 80.7%

Suppose that your scores were just the same as above, but you got a 25 on the final exam instead of a 75. Now the calculation would go like this:

Step 1:  80+70+30+90 = 270   (Notice that the 30 is not replaced this time.)
Step 2:  270 + 2×25 = 320
Step 3:  320 + 100 = 420
Step 4:  420/7 = 60.0%

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