Question

You buy a lottery ticket. It costs $10. The table shows the possible outcomes.

Result           Amount Won	Probability
Grand Prize         $100	0.025
Pretty Good Prize    $50	0.100
Okay Prize         $10	0.250
Sucker Prize             $1	0.300
No Prize               $0	0.325

1. Compute the expected value for this game. Don’t forget that a ticket costs $10.

Answer 1

Result           Amount Won	Probability
Grand Prize         $100	0.025
Pretty Good Prize    $50	0.100
Okay Prize         $10	0.250
Sucker Prize             $1	0.300
No Prize               $0	0.325

So,

Expected value = 100 * 0.025 + 50 * 0.1 + 10 * 0.25 + 1 * 0.3 + 0 * 0.325 - 10

EV = 10.3 - 10 = 0.3