Question

A raffle has 1,000 tickets, and each costs $19. One ticket will win a $940 prize. The remaining tickets will win nothing. If you buy a ticket, what is the expected profit?

Answer 1

To determine the expected profit of the raffle, the first step is to calculate the expected value.

You have two options, that you get the winning ticket for $940 or that you don't get the winning ticket.

There is a total of 1000 tickets on the raffle, the probability of getting the winning ticket can be calculated as follows:

`P(\$1000)=(1)/(1000)`

And the probability of getting a ticket without a prize can be calculated as follows:

`P(\$0)=(999)/(1000)`

The expected prize for the raffle can be calculated using the following formula: