Twenty thousand raffle tickets are sold for $4 each. Three prizes will be awarde

Question

Twenty thousand raffle tickets are sold for $4 each. Three prizes will be awarded, one for $10,000 and two for $5,000. Assume that the probability that any given ticket is selected for the S10,000 prize is $4 refunded to them. Jennifer purchases one of these tickets. Complete parts (a) and (b) below. (a) Determine Jennifer's expected value. 20,000 and the probability that any given ticket is selected for a $5,000 prize is 20,000.Winners do not have their ticket costs of (Type an integer or a decimal rounded to the nearest hundredth as needed.) (b) Determine the fair price of a ticket. (Type an integer or a decimal rounded to the nearest hundredth as needed.)

Explanation / Answer

A) Expected value = (Probability of winning × Amount won) + (Probability of losing× amount lost)

= 1/20000*(10000-4) + 2/20000*(5000-4)+ 19997/20000 *(-4)

=0.4998+0.4996-3.9994=-3

Expected loss of 3dollars

B)Let x be fair price.

For fair price, Expected value = 0

That is, 1/20000*(10000-x) + 2/20000*(5000-x) + 19997/20000 *(-x) = 0

10000-x + 10000-2x - 19997x = 0

20000x = 20000

x =$1

Fair price = $1

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