A purchase of 10 tickets is at an expected loss of $0.857 to the person.
Option B) $8.57 loss is the right choice.
What do we mean by Expected Gain or Loss?
The expected gain or loss is a weighted average of the probability of the different gains or losses and the gains or losses.
How do we solve the given question?
We are asked to calculate the expected gain or loss for a participant who purchases 10 tickets for a raffle costing $1 each, with a prize of a telescope valued at $425. We are told that a total of 2980 tickets have been sold.
First, we calculate the expected gain or loss on 1 ticket,
= 425*(1/2980) + (-1)(1)
= 0.1426174496 - 1
= -0.857382550.
∴ A purchase of 1 ticket is at an expected loss of $0.857
Now, we multiply this by 10 to get the expected gain or loss for the person with 10 tickets.
= -0.857382550*10 = -8.57382550
∴ A purchase of 10 tickets is at an expected loss of $0.857 to the person. Option B) $8.57 loss is the right option.
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