Question

The student council is hosting a drawing to raise money for scholarships. They are selling tickets for $9 each and will sell 500 tickets. There is one $2,000 grand prize, four $400 second prizes, and sixteen $10 third prizes. You just bought a ticket. Find the expected value for your profit. Round to the nearest cent.

Answer 1

expected profit = $-1.48

Explanation:

The required expected value can be solved below.

The total number of ticket they will sell = 500 tickets.

So,

expected profit = expected return - expected cost

1 grand price of 2000 = 1/500 × 2000 = 4

4 second price of $400 = 4/500 × 400 = 3.2

16 third price of $10 = 16/500 × 10 = 0.32

expected return = 4 + 3.2 + 0.32 = $7.52

expected cost = $9

expected profit = expected return - expected cost

expected profit = 7.52 - 9

expected profit = $-1.48