Question

A lottery ticket which pays $1 million dollars will only cost you $1 dollar. To win a person must match 5 numbers from a total of 59 numbers. What is the expected payoff if you purchase one ticket?
A) $0.20
B) $0.80
C) -$0.20
D) -$0.80

Answer 1

The total combinations of 5 numbers that can be made from 59 numbers is:

59C5 = 5,006,386

So the probability of winning is:

P = 1 / 5,006,386

P = 1.997 x 10^-7

 

So the expected payoff is:

P = $1,000,000 (1.997 x 10^-7) - $1 (1 - 1.997 x 10^-7)

P = - $0.80           (loss)

D