SOLUTION: You are asked to buy a ‘lucky draw’ ticket with the price of RM2. You can win RM5000 as first prize, RM1000 as second prize or RM500 as third prize with probabilities of 0.0

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Question 1175195: You are asked to buy a ‘lucky draw’ ticket with the price of RM2. You can win RM5000 as first prize,
RM1000 as second prize or RM500 as third prize with probabilities of 0.0001, 0.0005 and 0.0015 respectively.
Basing your decision on the expected value, should you buy the ticket? Why?
Found 2 solutions by ewatrrr, ikleyn:
Answer by ewatrrr(24785)   (Show Source): You can put this solution on YOUR website!

Hi
Finding the 'Expected Value' of the RM 2 Investment:
 5000(.0001) + 1000(.0005) + 500(.00015) = .5 + .5 + .75 = 
Ticket casts RM2:  Buy a ticket ?  
NO, As  RM 1.75 < RM 2
Wish You the Best in your Studies.


Answer by ikleyn(52781)   (Show Source): You can put this solution on YOUR website!
.

If you base your decision on the relative comparison of the expected winning value and the price of a ticket,

            then you  NEVER  should play lottery.


Because  EVERY  lottery,  which is organized to bring the profit to organizers,
has the expected winning value  LESS  THAN  the price of the ticket.



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