Question

At a carnival, there is a raffle with 125 tickets. One ticket will win a $150 prize, twelve tickets will win a $80 prize, and the remaining tickets will win nothing. If you have a ticket, what is the expected payoff?

Answer 1

Answer: E

Given data:

Total raffle tickets = 125

One ticket will win $150

12 tickets will win $80

112 tickets will win $0

P($150) = 1 / 125

P($80) = 12/ 125

P($0) = 112/125

The expected value is equal to the sum of each possible outcome multiplied by its corresponding probability

E(X) = 150 * 1/125 + 80* 12/125 + 0 * 112/125

E(X) = 150/125 + 960/125 + 0

E(x) = 1.2 + 7.68 + 8

E(X) = $8.88