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Answer:
The expected value of profit is -$0.65.
Step-by-step explanation:
The rules of the lottery are as follows:
- You pay $1 and pick a number from 000 to 999.
- If your number comes up, you win $350, which is a profit of $349.
- If you lose, you lose $1.
The probability of winning is, <em>P</em> (W) = 0.001.
Then the probability of losing will be,
P (L) = 1 - P (W)
= 1 - 0.001
= 0.999
Let the random variable <em>X</em> represent the amount of profit.
The probability distribution table of the lottery result is as follows:
<em>Result X P</em> (<em>X</em>)
Win +349 0.001
Lose -1 0.999
The formula to compute the expected value of <em>X</em> is:
Compute the expected value of profit as follows:
Thus, the expected value of profit is -$0.65.