Question

A cash prize is randomly placed into certain cereal boxes that sell for $5. A $1 prize is placed in 10% of cereal boxes, a $5 prize is placed in 5% of cereal boxes, while 10% of boxes receive a $20 prize. The other boxes do not receive any cash prizes. What is the expected value of the cash prizes if you include the cost of purchasing the cereal in your calculations?

Answer 1

-2.65 usd

Explanation:

1. Note that 10%= probability 0.1 5%= 0.05 .

Lets find the average prize value :

1 usd *P(1 uzd)+5usd *P(5usd)+20,usd*P(20usd)=

= 1*0.1+5*0.05+20*0.1=2.35 USD is a value average prize brutto.

However for 1 turn the player has to pay 5 USD.

That means the net value is 2.35-5=-2.65 USD

Actually it means that every turn the player loses 2.65 USD averagly.