Question

A local PTA runs a fundraiser, selling lottery tickets for $5, offering 1 first prize of $100 and 5 second prizes worth $20 each. They sell 100 tickets. What is the expected value of each ticket? -$3 $3 -$2.7 $2.7

Answer 1

The expected value is the expected income less the expected cost.

The expected cost is a certain; it is $5.

The expected income is the probability of each possibility times its reward.

=> First prize: probability * prize = (1 / 100) * $ 100 = $1

=> Second prize: probability * prize = (5 / 100) * $20 = $1

Expected value = $1 + $1 - $5

Expected value = - $3

Answer: - $ 3