SOLUTION: A lottery has one $2000 prize, two $1000 prizes, and ten $500 prizes. Two thousand tickets are sold at $5 each. Find the expectation if a person buys two tickets?

Question 358806: A lottery has one $2000 prize, two $1000 prizes, and ten $500 prizes. Two thousand tickets are sold at $5 each. Find the expectation if a person buys two tickets?
Found 2 solutions by edjones, jrfrunner:
Answer by edjones(8007) (Show Source): You can put this solution on YOUR website!
2k+2*1k+10*500=$9,000. prize money
.
9000 * 2/2000=$9.00 the expectation if a person buys two tickets.
.
Ed
Answer by jrfrunner(365) (Show Source): You can put this solution on YOUR website!
expectation is the same as the long term average value.
values are the net return
2000-5=1995
1000-5=995
500-5=495
-5=-5
you subtract 5 because the is the cost of playing and you dont get that back
--
each of these occur with prob
1/2000
2/2000
10/2000
1987/2000
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so the expected value or long term average is sum (value*prob)
=1995*(1/2000)+995*(2/2000)+495*(10/2000)+(-5)*(1987/2000)=-0.50 so on average you loose 0.50 for each ticket. If you buy 2 tickets your long term average is a loss of -1.00 dollar.
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