State lottery ticket costs $1; the probability of winning $1,000,000 is 0.0000001, probability of winning $1,000 is 0.000005, and the probability of winning $10 is 0.0002. Find the expected value.
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1,000,000 * .0.0000001 = 0.1
1000 * 0.000005 = 0.005
10 * .0002 = .002
.1 + .005 + .002 = $0.107 :)
I forgot to finish the last part of the question, it says Find the expected value (gain or loss) on one ticket. Does that change anything?
Ah :)You spent $1 for a ticket that has only an expected value of $0.107. So the expected return is 1-.107 = -0.893. It's a loss :)
Thank you so much!
Happy to help!
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