Question

The local fire company is having a raffle to raise money for Fourth of July fireworks. They will sell one thousand tickets at $10 each. They will award one first prize of $300, one second prize of $150, and one third prize of $50. The other tickets will win nothing. What is the expected value of a ticket?

Answer 1

The expected value of a ticket is of -$5.

Explanation:

The expected value of the ticked is the probability of earning each prize multiplied by the prize, and subtracted by the value of the ticket.

Value of the ticket:

$10.

100 tickets are sold. They will award one first prize of $300, one second prize of $150, and one third prize of $50.

Thus, 1/100 probability of earning $300, 1/100 probability of 150 and 1/100 probability of 50. So

`E = (1)/(100)300 + (1)/(100)150 + (1)/(100){50} - 10 = 3 + 1.5 + 0.5 - 10 = -5`

The expected value of a ticket is of -$5.