Sam bought 1 of 250 tickets selling for $2 in a game
with a grand prize of $400. Was $2 a fair price to pay for
a ticket to play this game?
expected return = (1/250)(400) = 1.6
If it was some kind of fund-raiser ?
What do you think?
I got -0.40 so how did you go about getting this answer
I see how you got it now thanks
To determine whether $2 is a fair price to pay for a ticket in this game, we can compare the expected value of playing the game with the cost of the ticket.
The expected value is calculated by multiplying the probability of winning the grand prize by the value of the grand prize, and subtracting the cost of the ticket from it.
In this case, there is only one grand prize of $400, and only one ticket that Sam bought. Therefore, the probability of Sam winning the grand prize is 1/250.
To calculate the expected value, we can use the following formula:
Expected Value = (Probability of Winning) * (Value of the Prize) - (Cost of the Ticket)
Expected Value = (1/250) * ($400) - ($2)
Simplifying the equation:
Expected Value = $400/250 - $2
Expected Value = $1.6 - $2
Expected Value = -$0.4
The result of the calculation is -$0.4, which means that the expected value of playing the game is a loss of $0.4.
Since the expected value is negative, it implies that, on average, players can expect to lose money by playing this game. Therefore, it can be concluded that $2 is not a fair price to pay for a ticket in this game.