What must the jackpot be before the expected payoff

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Reference no: EM131048006

Tennessee just instituted a state lottery. The initial jackpot is $100,000. If the first week yields no winners, the next week's jackpot goes up, depending on the number of previous players who placed the $1 lottery bets. The probability of winning is one in a million (1.0 × 10-6). What must the jackpot be before the expected payoff is worth your $1 bet? Assume that the state takes 60% of the jackpot in taxes, that no one else is a winner, and that you are risk neutral (i.e., you value the lottery at its expected value).

Reference no: EM131048006

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