A high school band booster club is selling 1000 raffle tickets for $1 each. The winner will be drawn randomly and will win $500. What is your expected gain if you purchased one ticket?

Question

anonymous · Answer

Expected value is negative fifty cents.  You put in a dollar.  You have a 1/1000 chance to win $500.  Multiply to get the expected return, subtract from the investment to get the expected gain of -$0.50.  This is, of course not really a gain....