Lottery: buy one of 20 for this raffle. raffle tickets or 10. The sponsors then

Question

Lottery: buy one of 20 for this raffle. raffle tickets or 10. The sponsors then ando nly select 1 grand prize worth $300 2 second prizes orth Szibe and 3 third prizes worth S each Bei w s the discrete p bability distribution Grand 1/200 Second 2/200 Third 3/200 None 194/200 (a) Recognizing that I spent $10 to buy a ticket, determine the expected value of this raffle to me as a player. Round your answer to the nearest penny (b) What is an accurate interpretation of this value? O It is meaningless because you can't actally wi or lose this amount. O It represents how much you would lose every time you play the game. O It represents how much you would win every time you play the game It represents the per-game average you would win/lose if you were to play this game many many times. (c) Based on your answers, would this raffle be a good financial investment for you and why? There is only one correct answer and reason O Yes, because the expected value is positive. Yes, because the expected value is negative. O No, because the expected value is positive. No, because the expected value is negative.

Explanation / Answer

(a)The expected value of this raffle:

E = (1/200)(300)+(2 /200) (120) +(3/200)(40)

= 1.5+1.2+0.6

= 3.3

(b) An accurate interpretation of this value is

It represents how much you would win every time you play the game.

(c) Would this raffle be a good financial investment

yes, because the expected value is positive.

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