Question

Lottery: I buy one of 200 raffle tickets for $10. The sponsors then randomly select 1 grand prize worth $300, 2 second prizes worth $80 each, and 3 third prizes worth $40 each. Below is the discrete probability distribution for this raffle.

Prize	P(x)
Grand	1/200
Second	2/200
Third	3/200
None	194/200

(a) Recognizing that I spent $10 to buy a ticket, determine the expected value of this raffle to me as a player. Round your answer to the nearest penny.
$

(b) What is an accurate interpretation of this value?

It represents how much you would lose every time you play the game. It represents how much you would win every time you play the game.    It represents the per-game average you would win/lose if you were to play this game many many times. It is meaningless because you can't actually win or lose this amount.

(c) Based on your answers, would this raffle be a good financial investment for you and why? There is only one correct answer and reason.

Yes, because the expected value is positive.Yes, because the expected value is negative.     No, because the expected value is positive.No because the expected value is negative.

Answer 1

Lottery: I buy one of 200 raffle tickets for $10. The sponsors then randomly select 1 grand prize worth $300, 2 second prizes worth $80 each, and 3 third prizes worth $40 each. Below is the discrete probability distribution for this raffle.

Prize	P(x)
Grand	1/200
Second	2/200
Third	3/200
None	194/200

(a) Recognizing that I spent $10 to buy a ticket, determine the expected value of this raffle =300*(1/200)+80*(2/200)+40*(3/200) +0*(194/200) = 2.9~$3
$

(b) What is an accurate interpretation of this value?

It represents the per-game average you would win/lose if you were to play this game many many times.

(c) Based on your answers, would this raffle be a good financial investment for you and why? There is only one correct answer and reason.

Yes, because the expected value is positive.