SOLUTION: To enter Ralph's Raffle, you buy a raffle ticket for four dollars. Ralph sells 1000 of these tickets altogether, and then randomly selectes one grand prize winner, who collects $80

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Question 1186185: To enter Ralph's Raffle, you buy a raffle ticket for four dollars. Ralph sells 1000 of these tickets altogether, and then randomly selectes one grand prize winner, who collects $800, and five lesser prize winners, each of whom gets $100.
Find your expected payoff if you enter Ralph's Raffle by buying a single ticket. Round your answer to the nearest cent.
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
the cost of a ticket is 4 dollars.

1 prize = 800 dollars.
5 lesser prizes = 100 dollars each.

1000 tickets were sold.

expected value would be -4 + 1/1000 * 800 + 5/1000 * 100 = -2.7

to see how this works, suppose you bought all 1000 tickets.

your total cost would be 1000 * 4 = 4000.
1 of them would give you 800.
5 of them would give you 100 each.

your expected value for all 1000 tickets would be -4000 + 1300 = -2700.
divide that by 1000 and it comes out to be -2.7 per ticket.