Suppose that in a seperate holiday gift raffle, you purchase threee tickets for
ID: 3323683 • Letter: S
Question
Suppose that in a seperate holiday gift raffle, you purchase threee tickets for a chance to win a 50$ coffee maker, a great gift for Mom! You have three chances to win at most one coffee maker.
A)
Suppose that your probability of winning each ticket is 0.1 The purchase price of all three tickets is 10$. Is it worthwile to take the risk and purchase the raffle tickets or just buy the coffee maker sperately for 50$?
B)
What is the maximum price you would be willing to pay for the three raffle tickets?
Explanation / Answer
A) probability of winning the coffee maker = 1 - failure in 3 attempts
= 1 - (1-p)^3
= 1 - (1 - 0.1)^ 3
= 0.271
E(X) = 10 / 0.271 = 36.900
since 36.900< 50
it is worthwile to take the risk and purchase the raffle tickets or just buy the coffee maker sperately for 50$.
b) P /0.271 = 50
P = 50 *0.271 = 13.55
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