SOLUTION: Sam bought 1 of 250 tickets selling for $2 in a game with a grand prize of $400. Was $2 a fair price to pay for a ticket to play this game? Thanks for your help.

Question 201968: Sam bought 1 of 250 tickets selling for $2 in a game with a grand prize of $400. Was $2 a fair price to pay for a ticket to play this game?
Thanks for your help.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Sam bought 1 of 250 tickets selling for $2 in a game with a grand prize of $400. Was $2 a fair price to pay for a ticket to play this game?
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Let the Random variable be "Gain to the buyer"
Random Variable Values: -2, 398
Corresponding Probabilities: (249/250) and (1/250)
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Expected Value: (-2)*(249/250) + (2)(1/250) = -$1.98
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You can expect to lose $1.98
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Cheers,
Stan H.

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