Question

A group holds a raffle to raise money. They sell 100 raffle tickets for $5 each. There is one grand prize worth $100, three second place prizes worth $25 each and 5 3rd place prizes worth $10 each. Find the expected value associated with the purchase of one ticket.

Answer 1

What you need to do in order to find the expected value is multiplying each value by its probability, and then totalling.
Thus prob($100) = 0.01
prob($25) = 0.03
prob($10) = 0.05
So Expected value = $(100*0.01 + 25*0.03 + 10*0.05) - $5 cost of ticket
............................ = $2.25 - $5
so the expected LOSS is $2.75
I hope this can help you