Suppose a person is shooting at a very small target Assume t

Suppose a person is shooting at a very small target. Assume that the person hits the target 1.5 percent of time. If the person hits the target, then the person wins $25,000. If the target is missed the loss is $500. Consider the amount of money to be won in this contest.

What is the variable?

What are the values of the variable?

What is the probability distribution?

What is the expected amount of money to be won?

What is the probability that the person does not lose money?

Solution

What is the variable?

The amount of money won/lost.

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What are the values of the variable?

Just either $25000 or -$500.
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What is the probability distribution?

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What is the expected amount of money to be won?

Consider:

Thus,  
  
E(x) = Expected value = mean = $ -117.5 [ANSWER]

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What is the probability that the person does not lose money?

P(not lose) = P(win) = 0.015 [ANSWER]