Question

There is a raffle with 500 tickets. One ticket will win a $660 prize, fifteen tickets will win a $160 prize, wenty tickets will win a $70 prize, and the rest will win nothing. If you have a ticket, what is the expected payoff?

Answer 1

To answer this question, we need to calculate the expected value for this raffle.

• We have that for winning the $660, we have a probability of 1/500.

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• For winning a $160 prize, we have a probability of 15/500.

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• For wining a $70 prize, we have a probability of 20/500.

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• For the rest, (500 - (1+15+20) = 500 - 36 = 464), that is, 464/500 you will expect win nothing.

Then, the expected payoff is given as follows:

`(1)/(500)\cdot660+(15)/(500)\cdot160+(20)/(500)\cdot70+(464)/(500)\cdot0=8.92`

Then, the expected payoff is $8.92.