One thousand tickets are sold at 1 each One ticket will be r

One thousand tickets are sold at $1 each. One ticket will be randomly selected and the winner will recieve a color television valued at $400. What is the expected value for a person that buys one ticket?

Solution

There are 1000 tickets.

Hence, the probability winning is

p(win) = 1/1000

while

p(loss) = 999/1000

If you win, you get x(win) = +$399.

If you lose, you get x(loss) = -$1.

Thus, the expected value is

E(x) = p(win) x(win) + p(loss) x(loss)

E(x) = -$ 0.60 [ANSWER]