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Chapter 8: Discrete Probability Distributions
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choose the third prize. Converting the percentages to probability, we will
have the probability distribution as given in
Table 8-5
.
Table 8-5:
Probability Distribution
for
Example 8-3
Thus, the expected value of the raffle is 0
(0.997) + 100
0.001 + 300
0.001
+ 500
0.001 = $0.90 or 90 cents. It would be unwise to spend more than 90
cents for a ticket.
Once again, one can also use the tabular presentation to help find the
expected value. This is shown in
Table 8-6
.
Table 8-6:
Probability Distribution and
Expected Value computations for
Example 8-3