Solve the problem.
-Suppose you buy 1 ticket for $1 out of a lottery of 1,000 tickets where the prize for the one winning Ticket is to be $500. What are your expected winnings?
A) -$0.40
B) -$0.50
C) -$1.00
D) $0.00

Question

Quizplus · Accepted Answer

The expected winnings can be calculated by multiplying the probability of winning with the amount won and adding it to the probability of losing multiplied by the amount lost. The probability of winning is 1/1000, and the prize is $500, so the expected winnings from winning are (1/1000)*$500 = $0.50. The probability of losing is 999/1000, and since you spend $1 to buy a ticket, the expected loss is (999/1000)*(-$1) = -$0.999. Adding these together, the expected winnings are $0.50 - $0.999 = -$0.499, which rounds to -$0.50.

Solve the Problem. -Suppose You Buy 1 Ticket for $1 Out of a Out