Question

An auction website charges $1 for a bid. The bidding starts at 1¢ and goes up 1¢ at a time. A television that is worth $2000 is won, on average, with a bid of $160. You make one bid at random.

Find the expected value of the outcome of the bid. (Write as an exact decimal, with a negative sign, if necessary.)

Expected Value: $

Answer 1

160 in 1¢ steps means 16,000 bids so you invest $1 with a 1/16000 probability of a $2000 return the expected value (in dollars) is ___ -1 + [(1/16000) * 2000)] this is why auction websites exist
THIS MEANS
it is a 1/16,000 chance of earning 1,999 while there is a 15,999 chance of losing a dollar so find 1/16000 which is 0.0000625 so do 1-0.0000625=.9999375 so .9999375*-1=-.9999375+(1999*.0000625=.1249375+-.9999375=0.875

Answer 2

The answer is actually -0.885

I specialize in these problems. And yes I checked the answer and this is correct.