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CHEGG At a raffle, 500 ticket are sold at $5 each. There are twenty $10 prizes, four $50 prizes, and one $100 prize. What is the expected gain for buying one ticket

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Answer: -$4

Explanation:

There are 500 tickets sold;

20 tickets will win $10

4 tickets will win $50

1 ticket will win $100

This means that the rest will lose the $5 they paid;

= 500 - 20 - 4 - 1

= 475

Gain = winning - cost of ticket

Expected return is a weighted average of the gains;

= (20/500 * 5) + (4/500 * 45) + (1/500 * 95) + (475/500 * -5)

= 0.2 + 0.36 + 0.19 - 4.75

= -$4