Problem 2 (20 points). Suppose that in a separate Holiday gift raffle, you purch
ID: 3323669 • Letter: P
Question
Problem 2 (20 points). Suppose that in a separate Holiday gift raffle, you purchase three tickets for a at most one coffee chance to win a $65 coffee maker, a great gift for Mom! You have three chances to win maker a) Suppose that your probability of winning on each ticket is 0.1. The purchase price of all three tickets 1S 510. ls it worthwhile to take the risk and purchase the raffle tickets or just buy the coffee maker separately for $65? b) What is the maximum price you would be willing to pay for the three raffle tickets?Explanation / Answer
a)P(winning atleast once in 3 tickets) = P(win)*P(loss)*P(loss)
= 0.1 * 0.9 * 0.9 = 0.081
So If you spend $10 on purchase of 3 tickets for coffee machine of $65
The actual amount (expected) you will pay is $10/0.081 = $123.46
Thus, its not worth to purchase 3 tickets of worth $10 for a coffee machine of $65
b) Maximum price of 3 raffle tickets = P(winning once) * Amount of win
= 0.081 * 65 = $5.265
Thus, Raffle ticket price should be less than or equal to $5.265