An advertisers gimmick tells you to tear a coupon off the ba

An advertiser’s gimmick tells you to tear a coupon off the back of a package and mail it to a contest address. If you are the lucky winner, you get a prize worth $1,000. For every 50,000 coupons sent in, one will be drawn. Say the cost of mailing (postage, envelope, etc.) is $0.55. What is the expected value of mailing in the coupon? Show your work.

Solution

1/50,000 * 1000 - 0.55 * 50,000

-27499.98

expected value = $ - 27499.98