Question

Suppose you buy 1 ticket for $1 out of a lottery of 1,000 tickets where the prize for the one winning ticket is to be $500. What are your expected winnings. The answer is -$0.50. But how do you get the answer?

Answer 1

I think the expected winnings is your winnings minus your ticket price, but it's the result you would get if you played this lottery repeatedly for a long time...

Answer 2

Another way of thinking about it would be that if you bought all 1000 tickets, you would spend $1000, and you would win $500.

So you would have a total loss of $500, and your loss per ticket purchased would be $500/1000 or -$0.50

Answer 3

ok that makes sense