Question

In a raffle, 1,000 tickets are sold for $2 each. One ticket will be randomly selected and the winner will recieve a laptop computer vauled at $1200. What is the expected value for a person that buys one ticket?

Answer 1

$ 1.2

Explanation:

The first thing is to define the expected value of the ticket that would be the sum of the value for all event probabilities.

That is, if you buy 1 ticket, for each participant the probabilities are:

1. 1/1000 to get a $ 1,200 item

2. 999/1000 to get nothing ($ 0).

That is to say:

(1/1000) * $ 1200 + (999/1000) * $ 0 = (1/1000) * $ 1200 = $ 1.2

Therefore, the expected value is $ 1.2, this means that in reality each participant pays $ 0.8 more than the ticket is worth