One thousand raffle tickets are sold for
4.00 each. one grand prize of $800 and two consolation prizes of $ 100 each will be awarded. Jeremy purchases one ticket. Find his expected value.
assume the grand prize is drawn first
prop of winning = 1/1000
expected value = 800(1/1000) = 80 cents
prob of winning the consolation prize
= 1/999 + 1/998 (I assume the tickets are not returned to the pot)
expected value for Jeremy
= (1/1000)(800) + 100(1/999) + 100(1/998)
= 1.00