Suppose you purchase a raffle ticket for $1.00. First prize is $5,000, second prize is $1,000, and third prize is $500. If 500 tickets are sold, what should you expect to win or lose? Round the answer to the nearest cent.

Question

Mercury · Answer

expected value: (probability of an outcome)(value of that outcome) summed for all outcomes

applying this to our problem, you have a 497/500 chance of losing $1 since the ticket cost 1 dollar, and there are only 3 winning tickets (500-3 = 497)

therefore, so far we have (-1)(497/500)

repeat this process with the winning tickets (making sure to subtract the cost of the ticket!) and then sum the results.

here are the choices, just so we have them on file:
$0.99 loss

$13.00 loss

$10.00 gain

$12.00 gain