Lottery: I buy one of 250 raffle tickets for $5. The sponsors then randomly select 1 grand prize worth $250, 2 second prizes worth $100 each, and 3 third prizes worth $50 each. Below is the discrete probability distribution for this raffle.
Prize P(x)
Grand 1/250
Second 2/250
Third 3/250
None 244/250
(a) Recognizing that I spent $5 to buy a ticket, determine the expected value of this raffle to me as a player. Round your answer to the nearest penny.
$
(b) What is an accurate interpretation of this value?
opt1- It represents how much you would win every time you play the game.
opt2- It is meaningless because you can't actually win or lose this amount.
opt3- It represents the per-game average you would win/lose if you were to play this game many many times.
opt4 - It represents how much you would lose every time you play the game.
(c) Based on your answers, would this raffle be a good financial investment for you and why? There is only one correct answer and reason.
opt1- Yes, because the expected value is positive.
opt2- Yes, because the expected value is negative.
opt3- No, because the expected value is positive.
opt4- No, because the expected value is negative.
1 answer