Expected Value Project PDF

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expected value problems...

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Expected Value Project 1. I received a solicitation in the mail offering prizes from an automobile dealership. The prizes and probability of winning were: Grand prize ($100,000) 1st prize ($10,000) 2nd prize ($1,000) 3rd, 4th, 5th, and 6th prize ($500 each) $5 Target card

1 out of 5,000,000 1 out of 1,000,000 1 out of 500,000 1 out of 250,000 (for each prize) 249,995 out of 250,000

In order to receive your prize, you have to physically go to the dealership. What is the expected value of a trip to the dealership to claim your prize.

2. If the trip takes 75 minutes, what would you expect to ‘earn’ per hour on the trip?

3. If there were no Target gift card, what would the expected value be?

4. In 2020, the IRS will allow mileage for business to be deducted at 57.5 cents per mile. Assuming that is what it costs you per mile to drive your vehicle, how far away would the dealership need to be for your driving cost to equal the expected value of the trip?

5. In 2019 in the US, there were 36,096 automobile deaths (https://www.nhtsa.gov/press-releases/2019fatality-data-traffic-deaths-2020-q2-projections) and 3.23 trillion miles driven (https://afdc.energy.gov/data/10315). If the dealership is 10 miles away (and thus a 20-mile roundtrip) are you more likely to win the grand prize, or to die in an automobile accident on your way there and back?...