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a lottery offers one $1000 prize

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Lottery Prizes Alottery offers one $1000 prize, one $500 prize, and five $100 prizes. One thousand tickets are sold at $3 each. Find the expe

Lottery Prizes Alottery offers one $1000 prize, one $500 prize, and five $100 prizes. One thousand tickets are sold at $3 each. Find the expectation if a person buys one ticket

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Best Answer

The expected value is given by:

(prize amt – cost to play) x (probability of winning)

So, we have three prizes. the probability of winning the $1000 and $500 prizes is 1/1000 and the probability of the $100 prize is 5/1000. So we have:

(1000 – 3)(1/1000) + (500 – 3)(1/1000) + (100 – 3)(5/1000) ≈ $1.98

In theory, you should probably play.

2 +0 Answers

There is $2000 worth of prizes and the tickets sell for a total of $3000

The expectation is 2/3 of $3 = $2

The expected value is given by:

(prize amt – cost to play) x (probability of winning)

So, we have three prizes. the probability of winning the $1000 and $500 prizes is 1/1000 and the probability of the $100 prize is 5/1000. So we have:

(1000 – 3)(1/1000) + (500 – 3)(1/1000) + (100 – 3)(5/1000) ≈ $1.98

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