LOTTERY GAME MATHS

Question

1. In a lottery game, a player picks six numbers from 1 to 23. If the player matches all six numbers, they win 20,000 dollars. Otherwise, they lose $1. What is the expected value of this game?

2.Based on historical data, an insurance company estimates that a particular customer has a 3.4% likelihood of having an accident in the next year, with the average insurance payout being $3300.

If the company charges this customer an annual premium of $370, what is the company's expected value of this insurance policy?

4.A company estimates that 0.7% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $450. If they offer a 2 year extended warranty for $57, what is the company's expected value of each warranty sold?

Answer 1

20,000(1/23)^6 - 1 = expected winnigs = about 0.14- 1 = 86 cents loss