Reader\'s Digest ran a sweepstakes in which the prizes were listed along with th
ID: 3062071 • Letter: R
Question
Reader's Digest ran a sweepstakes in which the prizes were listed along with the chances of winning: $1, 000, 000 (1 chance in 80, 000,000), $100, 000 ( 1 chance in 110, 000, 000), $25,000 ( 1 chance in 110, 000,000), $5000 (1 chance in 36, 600, 000), and $2, 500 (1 chance in 28, 500, 000) a) Assuming that there is no cost for entering the sweepstakes, find the expected value of the amount won for the one entry. b) Find the expected value if the cost of entering this sweepstakes is the cost of a postage stamp $0.82. Is it worth entering this contest? Note: Make a table with columns for the possible outcomes and the probability of each of the outcomes. Use the table to calculate the expected value in part a. Then use the value from part a to calculate the exnected value in nart hExplanation / Answer
a)
Expected value of amount won = $0.02
b) Expected value if cost of entering is $0.82 = 0.02 - 0.82 = -0.80 dollars
Since the expected winning is negative, it is not worth entering.
Prize in $ (a) Probability (b) (a)x(b) 1,000,000 1/80,000,000 0.0125 100,000 1/110,000,000 0.0091 25000 1/110,000,000 0.0002 5000 1/36,600,000 0.0001 2500 1/28,500,000 0.0001 Total 0.0220Related Questions
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