Terri decides to play the lottery.She has a 1% probability of winning $1000 and a 99% probability of winning $0.The expected value of her decision to play is

Question

Quizplus · Accepted Answer

The expected value of her decision is calculated as follows: 
(0.01 x 1000) + (0.99 x 0) = 10 
Therefore, the expected value of her decision is $10. The best choice would be not to play at all, as the expected value is lower than the cost of playing.

Terri Decides to Play the Lottery