Question

Melissa has bought a $\$ 2$ lottery ticket every week for the past 20 years. This week she won for the first time- $\$ 2,000$ in her state lottery. Compare these winnings to her total investment, and explain if the lottery was a worthwhile endeavor for her.

Name: Problem 28, Chapter 6: Financial Algebra
Uploaded: 2020-06-03T19:11:44-08:00
Duration: 2 min 4 s
Channel: Andrew Bassila
Description: Melissa has bought a 2 lottery ticket every week for the past 20 years. This week she won for the first time- 2,000 in her state lottery. Compare these winnings to her total investment, and explain if the lottery was a worthwhile endeavor for her.

   Melissa has bought a $\$ 2$ lottery ticket every week for the past 20 years. This week she won for the first time- $\$ 2,000$ in her state lottery. Compare these winnings to her total investment, and explain if the lottery was a worthwhile endeavor for her.

Financial Algebra

Robert Gerver,… 1st Edition

Chapter 6, Problem 28

Instant Answer

Solved by Expert Andrew Bassila

06/03/2020

Step 1

She bought a $2 lottery ticket every week. There are approximately 52 weeks in a year, so the total amount spent each year is $2 \times 52 = \$104$. Over 20 years, she spent $104 \times 20 = \$2080$. Show more…

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Melissa has bought a $\$ 2$ lottery ticket every week for the past 20 years. This week she won for the first time- $\$ 2,000$ in her state lottery. Compare these winnings to her total investment, and explain if the lottery was a worthwhile endeavor for her.

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Key Concepts

Return on Investment (ROI)

ROI measures the efficiency of an investment by comparing the net returns to the original cost. In scenarios involving regular expenditures over time, analyzing ROI helps clarify whether the financial gains adequately compensate for the cumulative expense.

Expected Value and Risk Assessment

Expected value represents the average outcome of a random process when considered over many repetitions, accounting for both positive returns and potential losses. Coupled with risk assessment, it provides a framework for evaluating whether participating in uncertain ventures, like lottery games, is justified relative to the likelihood of achieving significant rewards.

Cost-Benefit Analysis

This concept involves comparing the total costs incurred against the benefits received from an activity. In financial decision making, examining whether the gain (or reward) outweighs the expense is crucial in determining if an endeavor is worthwhile in the long run.

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