EXPLANATION
If the odds in favor are 7 to 5.
The expected value is a predicted value calculated by multiplying a value by its probability.
The probability is given by the following relationship:
In this case, odds in favor = 7
Total = 7 + 5 = 12
Replacing terms:
Now, we need to calculate the expected value by multiplying the Probability to the First Prize as shown as follows:
Hence, the expected value is $21,000