1000 raffle tickets are sold for $1 each. one prize of $200 is to be awarded. find the fair price of a ticket.

The answer is 80 cents. How did I get this?

Fair price of a ticket means this raffle will make no profit, the expected value is zero. The people holding to raffle will not lose nor make any money. The only winners would be the people who purchased the tickets.

1. To find the fair price you have to multiply the price of the prize by the probability:

Probability of winning = 1/1000 (because that's how many tickets were sold)

Cost of prize = $200

$200 x 1/1000 =.20

2. Subtract the cost of the ticket from the answer from #1

$1-.20 =.80

80 cent is the cost of a fair price ticket.