Question

A charity plans to do a game to help raise money. In the game, a total of 1,000 slips of paper will be sold for $1 each and the winner will win a total of $50. The expected value of each slip is -$0.95. Interpret this -0.95 in context. a The person who buys a slip loses an average of $0.05 per slip b The person who buys a slip loses an average of $0.95 per slip c Each person who buys a slip will lose $0.95 per slip d A person would have to buy 19 more slips of paper for the expected value of their gain to increase to $0.00 e A person has a 95% chance of having a slip that is not selected.

Answer 1

The expected value of -$0.95 indicates that for each slip purchased in the charity game, the buyer is expected to have an average loss of -$0.95.

Step-by-step explanation:

The expected value of -$0.95 for each slip in the charity game context means that, on average, a person who buys a single slip can expect to lose -$0.95. Therefore, the correct interpretation of this -$0.95 expected value is that for each slip purchased, the buyer is expected to have an average loss of -$0.95. This is calculated by considering the total possible gain (-$50 for the winner minus the -$1 cost to play), the probability of winning (-1/1000), and the losses incurred by those who do not win (the cost of their ticket). With these figures, the expected value is a representation of the average outcome per play if the game were to be played many times.