SOLUTION: six hundred chances are sold at $3 a piece for a raffle there is a grand prize of $400 two second prizes for $350 and five third prizes for $50 first calculate the expected value o

Question 810647: six hundred chances are sold at $3 a piece for a raffle there is a grand prize of $400 two second prizes for $350 and five third prizes for $50 first calculate the expected value of the game determine if the game is fair if the game is not fair determine a price for playing the game that would make it fair

Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
six hundred chances are sold at $3 a piece for a raffle
there is a grand prize of $400 two second prizes for $350 and five third prizes for $50 first calculate the expected value of the game determine if the game is fair if the game is not fair determine a price for playing the game that would make it fair
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Random "winning" values:: 397....347.....47...... -3
Probabilities::...........1/600..2/600...5/600....592/600
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Expected value = [397 + 2*347 + 5*47 - 3*592]/600 = -75 cents
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Not fair to the player as he can expect to lose 75 cents for each ticket bought.
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Fair price 3.00 - 0.75 = $2.25
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Cheers,
Stan H.
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