SOLUTION: 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.
a) Find the expect
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Question 180887This question is from textbook
: 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.
a) Find the expected value
b) Find the fair price of the ticket.
This question is from textbook
Answer by edjones(8007) (Show Source): You can put this solution on YOUR website!
you have 7 chances to win a total of 850
-2 * (1000-7)/1000=-993/500
850/7 * 7/1000=17/20
17/20 - 993/500=-142/125 or -$1.136 EV Since the EV is negative you will lose $1.136 for every $2 ticket you buy.
.
Fair price of a ticket = 850/1000=$.85
.
Ed
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