Question

At a carnival, there is a raffle with 100 tickets, each costing $7. One ticket will win a $420 prize, and the rest will win nothing. If you buy a ticket, what is the expected profit?

Answer 1

ANSWER

$-6.34

EXPLANATION

Let 'X' be the event with the net profit.

The expected value of X is:

$E(X)=P(\text{ winning)}(420-7)+P(\text{ losing})(0-420)$

The probability of winning is the probability of choosing 1 right number out of the 100 numbers of the raffle:

$P(\text{wining)}=\frac{1}{100}$

The probability of losing is the probability of getting any of the other numbers:

$P(lo\sin g)=1-P(wining)=1-\frac{1}{100}=\frac{99}{100}$

The exp