Question

In a raffle, you have a 1 475 probability of winning. You spent $5.00 to be entered in the raffle and the prize is a grandfather clock worth $1200. What are your expected winnings in terms of dollars

Answer 1

Expected Earning = $2.6

Explanation:

Expected Value is the average value of outcomes, weighted with their respective probabilities.

E (X) = Σ (X.PX) ;

where E (X) = Expected Value, X = Outcome, P(X) = probability of X

Expected Value = [X (win) . Prob (win)] + [X (lose) . Prob (lose)]

• X (win) = 1200 - 5 = 1195
• X (lose) = -5
• Prob (Win) = 1/475 = 0.002
• Prob (Lose) = 1 - Prob (Win) = 1 - 0.002 = 0.998

So ; E (X) = (1195) (0.002) + (-5)(0.998)

2.39 - 4.99

= $2.6