SOLUTION: 1000 tickets are sold @ $1. One prize is awarded $1,000. What is the fair price of the ticket?

Question 286919: 1000 tickets are sold @ $1. One prize is awarded $1,000. What is the fair price of the ticket?
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
1000 tickets are sold @ $1. One prize is awarded $1,000. What is the fair price of the ticket?
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Random Numbers winning values: $999, -$1
Corresponding Probabilities::: (1/1000), (999/1000)
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Expected Winnings = 999(1/1000)+(999/1000)(-1)
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E(x) = (999/1000)-(999/1000)
E(x) = 0
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$1 is a fair price.
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Cheers,
Stan H.
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