SOLUTION: You buy a lottery ticket to a lottery that costs $10 per ticket. There are only 100 tickets available to be sold in this lottery. In this lottery there are one $425 prize, two $95

Question 1206534: You buy a lottery ticket to a lottery that costs $10 per ticket. There are only 100 tickets available to be sold in this lottery. In this lottery there are one $425 prize, two $95 prizes, and four $20 prizes. Find your expected gain or loss. (Round your answer to two decimal places.)
Answer by greenestamps(13203) (Show Source): You can put this solution on YOUR website!

(1) Using the formal definition of expected value....

The expected value of a ticket is

or $6.95.

Then, since the cost of a ticket is $10, the expected gain or loss for each ticket is $6.95-$10 = -$3.05.

(2) Using informal logical reasoning....

The total cost of the tickets is $1000; the total prize money is $425 + 2($95) + 4($20) = $695. So the average payout per ticket is ($695-$1000)/100 = -$3.05.

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