Essentials of Statistics (5th Edition)

Published by Pearson
ISBN 10: 0-32192-459-2
ISBN 13: 978-0-32192-459-9

Chapter 5 - Discrete Probability Distributions - Review - Review Exercises - Page 231: 8

Answer

She should continue playing.

Work Step by Step

All 5 prizes have the equal probability of $\frac{1}{5}$, therefore the expected value is: $\frac{1}{5}\cdot (75+300+75000+500000+1000000)=315075.$ The offer is a lot less than the expected value, therefore she should continue playing.
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