Financial expectation help! (1 Viewer)

[Muzzaw]

stop making it so confusing. the price he paid for the ticket doesnt come into the equation. its (2/500) x 1000 = $4. His financial expectation is $4, which is not worth buying a ticket for, since the tickets are $5 each.

That's not financial expectation, if you said that you'd be wrong.

 

[H.S.What?]

ok bare with me for a second..
in this question..just tell me if i did this right

Amy buys a $1 ticket in a raffle. There are 200 tickets in the raffle and two prizes. First prize is $100 and second prize is $50. Find Amy's financial expectation

ok.. so i did

(199/200 * -$1) + (1/200 * $100) + (1/199 * $50)

= -$0.25

am i right?

no.

(1/200) x 100 + (1/200) x 50 = 50c + 25c
= $0.75 financial expectation

 

[Muzzaw]

Or: (1/200) x 100 + (1/199) x 50 - 1/200 x 1 - 1/199

 

[Casmira]

it is taken to account afaik

 

[H.S.What?]

lol wait, now im not sure.

i think its
(1/200 x 100) + (1/200 x 50) + (199/200 x -1)
= $-0.245

 

[Casmira]

it cant be 1/200 x 50, the only way the person can get that $50 is if 1st prize is won and if thats the case then there is only 199 tickets left therefor it'd be 1/199 x 50

 

[H.S.What?]

well sometimes first prize isnt drawn first so it might not be 1/199 x 50

 

[Muzzaw]

Lol, the first ticket drawn gets first prize.

 

[_muse_]

look, it was a multiple choice question..
the choices were
A -$1
B -$0.75
C -$0.25
D +$0.25

i got C, as you saw.. i just need to know if its right or wrong, whether i did it right or not.. im getting confused by all this stuff you guys are saying haha

 

[Casmira]

it has to be drawn, if you got 200 tickets and 200 people waiting there for their $100 or $50 prize, and lets say number 43 wins, then mr bob will claim his ticket/prize, what will be left is 199 tickets and the $50 prize

you cant assume "not everyone will turn up" think of it as a perfect environment

 

[Jayphen]

no.

(1/200) x 100 + (1/200) x 50 = 50c + 25c
= $0.75 financial expectation

This is incorrect.

The financial expectation is -$0.25

You do have to take into account the chance of her losing as well as winning

 

[willimitchi]

can someone help me with this?

The chance of a car being stolen is 0.04 and an insurance company pays back market price if stolen. Insurance is $975 for a car worth $26,000. Is it a worthwhile cost for the insurance company? justify your answer with financial expectation calculations.

 

[InteGrand]

can someone help me with this?

The chance of a car being stolen is 0.04 and an insurance company pays back market price if stolen. Insurance is $975 for a car worth $26,000. Is it a worthwhile cost for the insurance company? justify your answer with financial expectation calculations.

I'm guessing it's not worthwhile, because the expected amount the company would have to pay is , which is more than the $975 premium, so they'd be expected to make a loss.