Question

In a raffle where 6000 tickets are sold for $2 each, one prize of $6600 will be awarded. What is the expected value of a single ticket in the raffle?

Answer 1

The expected value is the sum of the products of the probability of each outcome and the payout for that outcome:

Probability of winning:

$\frac{1}{6000}$

Payout for winning:

$6600-2=6598$

Probability of not winning:

$\frac{5999}{6000}$

Payout for not winning:

$-2$

Therefore:

$E=(\frac{1}{6000}\cdot6598)+(\frac{5999}{6000}\cdot-2)=-0.9$

Answer:

The expected value of a single ticket is -$0.9