posted by Jen .
One thousand raffle tickets are sold for $1.00 each. One grand prize of $400 and two consolation prizes of $100 each will be awarded. Jeremy purchases one ticket. Find his expected value.
Think of what you'll get if you bought all the tickets, and go from there.
If you bought all 1000 tickets, it would have cost you $1000.
However, you would get the grand prize of $400 and 2 consolation prizes of $100 each for a total of $600.
So you get back $600 for the $1000 that you spent, or, on the average, $0.60 for each ticket you buy.
so his expected value is $600?
What is Jeremy's expected value?
$600? or $400??
But Jen, in the end he only bought one ticket, not 1000. 600/1000
MathMate already told you the answer.
Perhaps it is easier from the point of view of the seller.
Sold 1000 tickets for 1000 dollars.
Gave out 600.
So .6 of the income is paid out. So if you put in $1, you can expect .6 * $1 = $0.60