Question 461062: Six hundred chances are sold at $7 apiece for a raffle. There is a grand prize of $500 dollars, two second prizes of $250, and five third prizes of $100. First calculate the expected value of the lottery. Determine if the lottery is a fair game. If the game is not fair, determine a price for playing the game that would make it fair.
The expected value of the game is $______
If the game is not fair, determine a price for playing the game would make the game fair. $_______
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Six hundred chances are sold at $7 apiece for a raffle.
There is a grand prize of $500 dollars, two second prizes of $250, and five third prizes of $100.
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First calculate the expected value of the lottery. Determine if the lottery is a fair game. If the game is not fair, determine a price for playing the game that would make it fair.
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Random gain values: 493, 243, 93, -7
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Corresponding Probs: 1/600 , 2/600, 5/600, 592/600
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E(x) = [493+2*243+5*93+592*-7]/600
E(x) = -$4.50
The expected value of the game is $-$4.50
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If the game is not fair, determine a price for playing the game would make the game fair. $7-4.5 = $2.50
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Cheers,
Stan H.
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