In a raffle, 1,000 tickets are sold for $2 each. One ticket will be randomly selected and the winner will receive a laptop computer valued at $1200. What is the expected value for a person that buys one ticket?
A)-$0.80
B)$0.8
C)$1.20
D)-$1.20

Question

Quizplus · Accepted Answer

The expected value (EV) is calculated by multiplying the probability of winning and the value of the prize, then adding the product of the probability of losing and the loss (ticket cost). Probability of winning = 1/1000, value of prize = $1200, probability of losing = 999/1000, cost of ticket = $2. EV = (1/1000)*$1200 + (999/1000)*(-$2) = $1.20 - $1.998 = -$0.80.

In a Raffle, 1,000 Tickets Are Sold for $2 Each