Question

A convenience store has made up 40 grab bag gifts and is offering them for $2.00 a bag. Ten bags contain merchandise worth $1.00. Ten bags contain merchandise worth $2.00 and Twenty bags contain merchandise worth $3.00. Suppose you purchase one bag. What is your expected gain or loss? [2 marks] $0.25 O-30.25 O $2.20 -$2.20

Answer 1

These are total 40 Bags 40 10 of them contain Merchandise worth $1.00 p[ winning $ 1.00] -405 10 Bags containing Merchandise worth $ 2.00 · . p [ Winning #2:00] = 10 20 Bags Containing Merchandise worth $3.00 P[ winning & 3:00] = 20 1 2 . Expected winning is = ? (1x P[$4.00] + 2x p[ $2.00] + 3x P[$ 3,00]) 1 3 1x / / + 2x + 3x 1 - 2 2 $ 2.25 · Price of a Bag is = $2.00 . Expected Gain is : Expected winning - Price o 24 25 -2.00) $ 0.25

Expected gain is $ 0.25

Answer 2

SOLUTION :

Expected gain / Loss

= P(get $1 bag)  * ! + P(get $2 bag) * 2 + P(get $3 bag ) * 3 - Purchase cost  

= 10/40 * 1 + 10/40 * 2 + 20/40 * 3 - 2

= 0.25 ($) Gain : First Option  (ANSWER).