Question

A Lottery offers one $1000 prize, one $500 prize, and five $100 prizes. One thousand tickets are sold at $3 each. Find the expected winnings and standard deviation if the double the winnings. And find the expected winnings and standard deviation if you play the game twice.

Answer 1

$1.98

Step-by-step explanation:

The expected value is given by:

(prize amt - cost to play) x (probability of winning)

So, we have three prizes....the probability of winning the $1000 and $500 prizes is 1/1000 and the probability of the $100 prize is 5/1000. So we have:

(1000 - 3)(1/1000) + (500 - 3)(1/1000) + (100 - 3)(5/1000) ≈ $1.98

In theory, you should probably play.