Question 729687: Hello, having some problems with this section, please help.
Tyrone pays $5 for a lottery ticket. There is a 0.1% chance that he will win $200, a 1% chance that he will win $50, and a 5.2% chance that he will win $25 (Otherwise, he wins nothing.). Find his expected payoff. (How much can he expect to win or lose on average? Don't forget to include the price of the ticket!) Round to the nearest penny.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Tyrone pays $5 for a lottery ticket. There is a 0.1% chance that he will win $200, a 1% chance that he will win $50, and a 5.2% chance that he will win $25 (Otherwise, he wins nothing.). Find his expected payoff.
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Random winning values: 195......45......20..........-5
Probabilities::::::::: 1/100...1/100...5.2/100....92.5/100
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Expected Winning: [1*195 + 1*45 + 5.2*20 - 5*92.5)/100 = -118.5/100
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= -$1.19
You can expect to lose $1.19 every time you play the game.
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Cheers,
Stan H.
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