Expected Value (Continuation of Exercise 61) Gladys has a personal rule never to enter
Chapter 9, Problem 9.1.1.195(choose chapter or problem)
Expected Value
(Continuation of Exercise 61) Gladys has a personal rule never to enter the lottery (picking 6 numbers from 1 to 46) until the payoff reaches 4 million dollars. When it does reach 4 million, she always buys ten different $1 tickets.
(a) Assume that the payoff for a winning ticket is 4 million dollars. What is the probability that Gladys holds a winning ticket? (Refer to Example 1 of this section for the probability of any ticket winning.)
(b) Fill in the probability distribution for Gladys’s possible payoffs in the table below. (Note that we subtract $10 from the $4 million, since Gladys has to pay for her tickets even if she wins.)
(c) Find the expected value of the game for Gladys.
(d) In terms of the answer in part (b), explain to Gladys the long-term implications of her strategy.
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