Suppose that 2.5 million tickets are sold. What is the expected value (in dollars) of a ticket?

Question

A lottery game offers $3 million to the grand prize winner, $20 to each of 10,000 second prize winners, and $4 to each of 50,000 third prize winners. The cost of the lottery is $2 per ticket. Use the method of Example 9.8.5 to answer the following question.

Suppose that 2.5 million tickets are sold. What is the expected value (in dollars) of a ticket?

Answer 1

Value Probability

3 million - 2 1 / 2.5 million

20 - 2 10000 / 2.5 million

4 - 2 50000 / 2.5 million

-2 (2.5 million - 1 - 10000 - 50000) / 2.5 million

Multiply the values with the corresponding probabilities and add them up