document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=204955>Question 204955</A>: <I><SPAN STYLE=\"word-break: break-all;\"> I am having trouble with this: <BR>\n" );
document.write( "500 tickets for prizes are sold for $2 each. Five prizes will be awarded - one for $300, one for $200, and three for $50. Steven purchases one fo the tickets.\r<BR>\n" );
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document.write( "a)Find the expected value.<BR>\n" );
document.write( "b)Find the fair price of the ticket.\r<BR>\n" );
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document.write( "So far, for a, I think you would do something like this: \r<BR>\n" );
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document.write( "1st prize: 1/500 = 0.002<BR>\n" );
document.write( "2nd prize: 1/500 = 0.002<BR>\n" );
document.write( "3rd prize: 3/500 = 0.006\r<BR>\n" );
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document.write( "so, $300(0.002) + $200(0.002) + $50(0.006) = $1.30\r<BR>\n" );
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document.write( "For b, I do not know where to begin. <BR>\n" );
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document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #154720 by </B><A HREF=/tutors/aboutme.mpl?userid=stanbon><B>stanbon(75887)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=stanbon><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/images/nopicture.jpg><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=154720\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> I am having trouble with this: <BR>\n" );
document.write( "500 tickets for prizes are sold for $2 each. Five prizes will be awarded - one for $300, one for $200, and three for $50. Steven purchases one fo the tickets. <BR>\n" );
document.write( "a)Find the expected value.<BR>\n" );
document.write( "b)Find the fair price of the ticket. <BR>\n" );
document.write( "So far, for a, I think you would do something like this: <BR>\n" );
document.write( "1st prize: 1/500 = 0.002<BR>\n" );
document.write( "2nd prize: 1/500 = 0.002<BR>\n" );
document.write( "3rd prize: 3/500 = 0.006 <BR>\n" );
document.write( "so, $300(0.002) + $200(0.002) + $50(0.006) = $1.30<BR>\n" );
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document.write( "You have forgotten that the buyer might not win any prize.<BR>\n" );
document.write( "The probability of that happening is (495/500)<BR>\n" );
document.write( "Then E(x) = $298(0.002) + $198(0.002) + $48(0.006) -2(495/500) = <BR>\n" );
document.write( "[298 + 198 + 3*48 -2*495)/500 = -70 cents\r<BR>\n" );
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document.write( "The buyer can expect to lose 70 cents when he pays $2 for a ticket.<BR>\n" );
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document.write( "b)Find the fair price of the ticket. <BR>\n" );
document.write( "A \"Fair\" price would result in the buyer and the seller having<BR>\n" );
document.write( "an expected gain/loss of zero.<BR>\n" );
document.write( "For this game the buyer should pay $2-0.70 = @1.30 per ticket.<BR>\n" );
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document.write( "Cheers,<BR>\n" );
document.write( "Stan H. <BR>\n" );
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