Question

Calculate the expected value of playing a lottery ticket game where each ticket costs $5, and the chance of having winning ticket is one in one million, and the payout for having a winning ticket is 4.9 billion dollars. Round the expected value to the nearest cent.

Answer 1

$4895

Explanation:

P(winning) = 1 / 1000000 = 0.000001

P(not winning) = 1 - 1/1000000 = 0.999999

Winning amount = 4,900,000,000 - 5 = 4899999995

Amount lost = - 5

__ X: - 5 _________ 4899999995

P(X) : 0.999999 ___ 0.000001

Expected value E(x) = Σx * p(x)

E(x) = - 5(0.999999) + 4899999995(0.000001)

E(x) = - 4.999995 + 4899.999995

E(x) = 4895

Hence, expected value is 4895