SOLUTION: 500 hundred raffle tickets were sold for $2 each. A prize of $400 is to be awarded. If you buy 1 ticket,determine the expected value. What is the fair price for a ticket. with

Question 578142: 500 hundred raffle tickets were sold for $2 each. A prize of $400 is to be awarded. If you buy 1 ticket,determine the expected value. What is the fair price for a ticket.
with replacement
without replacement
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
500 hundred raffle tickets were sold for $2 each. A prize of $400 is to be awarded. If you buy 1 ticket,determine the expected value. What is the fair price for a ticket.
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Random variable values: -2 ; 398
Probabilities::::::::::499/500 ; 1/500
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Expected Value: E(x) = (499/500)(-2) + (1/500)398
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= (-998+398)/500 = -600/500 = -6/5 = -$1.20
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with replacement
without replacement
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Comment: With or without replacement has no relevance
as there is only one drawing.
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A fair ticket price would be $2-1.20 = 80 cents
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Cheers,
Stan H.
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