SOLUTION: One thousand raffle tickets are sold for $2.00 each. One grand prize of $500 and two consolation prizes of $100 each will be awarded. Jeremy purchases one ticket. Find his expected

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Question 381418: One thousand raffle tickets are sold for $2.00 each. One grand prize of $500 and two consolation prizes of $100 each will be awarded. Jeremy purchases one ticket. Find his expected value.
Found 2 solutions by edjones, robertb:
Answer by edjones(8007) About Me  (Show Source):
You can put this solution on YOUR website!
500+200=700
1/1000 * 700 = 700/1000 = $0.70 expected value of the ticket.
Since he paid more than $0.70 for the ticket he has a bad bet.
.
Ed

Answer by robertb(5830) About Me  (Show Source):
You can put this solution on YOUR website!
If you're asking for his EXPECTED EARNINGS, then it is computed as follows:
His chance of winning the grand prize is 1/1000. His earning then would be 500 - 2 = $498.
His chance of winning $100 is 2/1000, and his earning then would be 100 - 2 = $98.
His chance of losing (or not winning any) is 997/1000. He stands to lose -$2 in that case.
His expected earnings is then 498%2A%281%2F1000%29+%2B+98%2A%282%2F1000%29+%2B+%28-2%29%2A%28997%2F1000%29+=+-1.3. Thus he stands to lose $1.30 on the average.