Question

In a radio station contest, the first prize is $2,000 and the second prize is $500. The probability of winning the first prize is 0.005 and the probability of winning the second prize is 0.008. The station runs this contest many, many times to increase its listening audience. What is the expected payout for each time the station offers the opportunity to win the prizes?

Answer 1

Answer is $14 = $2,000 x 0.005 + 500 x 0.008 = $10 + $4 = $14