A punch-out card contains 100 spaces. One space pays $500, five spaces pay $25, and the...

A punch-out card contains 100 spaces. One space pays $500, five spaces pay $25, and the others pay nothing. How much should you pay to punch out one space? (Assume that you wish to pay the fair price.)

Expert Solution

SOLUTION:

From given data,

A punch-out card contains 100 spaces. one space pays $500, five space pay $25 , and the others pay nothing .how much should you pay to punch out one space?(Assume that you wish to pay the price)

Since there are a hundred spaces,

The probabilities of each space is

P($500 space) = 1/500

P($25 space) = 5/500

P(Other space) = 494/500

you must find out the average amount you will win per space to figure out what a fair price to pay is.

Y = 1/500x500+5/500x25+494/500x0 .

Y=0.25

would be the average amount you've won, after breaking

each number of slots down one at a time. If you are paying more than the average amount you would win, you will lose money in the long run. If you're paying less, you will win money. As to what a fair price is, that would be personal opinion.

orchestra answered 1 year ago

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