SOLUTION: not sure if this is right
6. (4 pts)
1000 tickets for prizes are sold for $2 each. Seven prizes will be awarded – one for $400, one for $200, and five for $50. Steven purchas
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Question 144879This question is from textbook
: not sure if this is right
6. (4 pts)
1000 tickets for prizes are sold for $2 each. Seven prizes will be awarded – one for $400, one for $200, and five for $50. Steven purchases one of the tickets.
400(1/1000) + 200(1/1000) + 50(5/1000) – 2(993/1000) = -1.14
a) Find the expected value expected value is -$1.14
b) Find the fair price of the ticket. ?????
This question is from textbook
Answer by solver91311(24713) (Show Source): You can put this solution on YOUR website!
You have part a done correctly. Steven (or anyone else for that matter) can expect to lose -$1.14 for every $2.00 spent. In other words, the game is rigged (way, way, way) in favor of the house.
The fair price for a ticket is that price that would make the expected value be zero. So, reuse your expected value formula, this time using a variable in place of the $2 in your previous calculation and set it equal to 0:
Solve for and you have your fair price.
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