Question

In a raffle, one ticket will win $120 prize, six tickets will win a $70 prize, and the other tickets will wie nothing. There are 500 in the raffle. If you have a ticket, what is the expected payoff?

Answer 1

Step 1:

Draw out a table as shown below

x | Number of tickets(n) | Pr(x)= n / 500 | xPr(x)

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$120 | 1 | 0.002 | 0.24

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$70 | 6 | 0.012 | 0.84

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$0 | 493 | 0.986 | 0

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Step 2:

We calculate the expected payoff. The expected payoff is

`\sum \text{xPr(x) = 0.24 + 0.84 + 0 = \$1.08}`

The expected payoff is $1.08