Suppose a lottery ticket costs $1 and the probability that a holder will win nothing is 90%.What must the jackpot be for this to be a fair bet?
A)10
B)100
C)1,000
D)10,000

Question

Quizplus · Accepted Answer

The expected value of a lottery ticket is the probability of winning multiplied by the amount won, minus the cost of the ticket. In this case, the probability of winning is 10%, and the amount won is the jackpot. The cost of the ticket is $1. So, the expected value of a lottery ticket is:EV = 0.1 * Jackpot - 1For this to be a fair bet, the expected value must be equal to zero. So, we can solve for the jackpot:0 = 0.1 * Jackpot - 11 = 0.1 * JackpotJackpot = 10Therefore, the jackpot must be $10 for this to be a fair bet.

Suppose a Lottery Ticket Costs $1 and the Probability That