Respuesta :
Answer:
The expected value of profit is -$0.65.
Step-by-step explanation:
The rules of the lottery are as follows:
- You pay $1 and pick a number from 000 to 999.
- If your number comes up, you win $350, which is a profit of $349.
- If you lose, you lose $1.
The probability of winning is, P (W) = 0.001.
Then the probability of losing will be,
P (L) = 1 - P (W)
= 1 - 0.001
= 0.999
Let the random variable X represent the amount of profit.
The probability distribution table of the lottery result is as follows:
Result X P (X)
Win +349 0.001
Lose -1 0.999
The formula to compute the expected value of X is:
[tex]E(X)=\sum X\cdot P(X)[/tex]
Compute the expected value of profit as follows:
[tex]E(X)=\sum X\cdot P(X)[/tex]
[tex]=(349\times 0.001)+(-1\times 0.999)\\\\=0.349-0.999\\\\=-0.65[/tex]
Thus, the expected value of profit is -$0.65.
