Find the expected value of the random variable. Round to the nearest cent unless stated otherwise.
-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 is your expected value?
A)-$1.00
B)-$0.40
C)-$0.50
D)$0.00

Question

Find the expected value of the random variable. Round to the nearest cent unless stated otherwise.
-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 is your expected value? 
A)-$1.00
B)-$0.40
C)-$0.50
D)$0.00

Quizplus · Accepted Answer

The expected value is calculated as the probability of winning times the prize minus the cost of the ticket. The probability of winning is 1/1000, so the expected value is (1/1000) * $500 - $1 = $0.50 - $1 = -$0.50. However, since the options provided do not include negative values, the closest positive expected value is $0.50.

Find the Expected Value of the Random Variable