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Suppose thata lottery has the following odds:Amount Won Probability of Winning03/521/51/105103/50509/2501/2501001. If you pay $3 to play this game, what is the ex

Question

Suppose that a lottery has the following odds:

1) If you pay $3 to play this game, what is the expected amount of money you would gain after playing?

 
 
 

2) What amount of money should you pay if you don’t want to lose any money on average?

 
 
 
Suppose thata lottery has the following odds:
Amount Won Probability of Winning
0
3/5
2
1/5
1/10
5
10
3/50
50
9/250
1/250
100
1. If you pay $3 to play this game, what is the ex
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Suppose thata lottery has the following odds: Amount Won Probability of Winning 0 3/5 2 1/5 1/10 5 10 3/50 50 9/250 1/250 100 1. If you pay $3 to play this game, what is the ex

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Step 1

1) Considering the provided distribution, the expected value without losing any money is,

E(X)-Σxp (x)
3
(0)
3
1
(5)+(10)+
(100)
250
(2) -
10
(50)
50
250
- $3.7
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E(X)-Σxp (x) 3 (0) 3 1 (5)+(10)+ (100) 250 (2) - 10 (50) 50 250 - $3.7

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Step 2

Therefore, the expected amount o...

Expected value without losing any money
-Amount paid to play the game
Expected amount after gaining
- $3.7-$3
$0.7
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Expected value without losing any money -Amount paid to play the game Expected amount after gaining - $3.7-$3 $0.7

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