100 raffle tickets are sold for $3 with one grand prize of $200. Julie purchased one ticket. What is her expectation?
100 raffle tickets are sold for $3 with one grand prize of $200. Julie purchased one ticket. What is the expected value of her ticket?
What is the fair value of a ticket?
To calculate Julie's expectation, we need to consider the probability of winning and the amount won or lost.
In this case, there are 100 raffle tickets sold and only one grand prize. Therefore, the probability of Julie winning the grand prize is 1/100.
Now, let's calculate the expected value:
Expected Value = (Probability of Winning) * (Amount Won) + (Probability of Losing) * (Amount Lost)
Amount won = $200
Amount lost = $3 (since Julie purchased one ticket for $3)
Expected Value = (1/100) * $200 + (99/100) * (-$3)
Calculating this equation:
Expected Value = $2 - $2.97
Therefore, Julie's expectation is -$0.97 (rounded to the nearest cent).
This means that, on average, Julie can expect to lose approximately $0.97 for every raffle ticket she purchases.