1. CASH-3, POWERBALL, MEGA MILLIONS, AND OTHER WAYS TO WASTE YOUR MONEY Lotteries

2. Types of Lotteries Scratch-off Tickets Ready-printed numbers User-selected number games Video based games

3. User-Selected Number Games One-number Multi-number Multi-number with two sets of numbers Keno type

4. Cash 3 Pick a three digit number from 000 – 999. Say, 123. Two main types of bets:  Straight bet indicates you think it will be an exact match. That is, you think the number 123 will win.  Box bet indicates that you think it will be those digits, but a possibly different order. You can win with 213, 312, 321, 132, 231 as well as 123. Other bets may include combo, front pair, back pair, and split, but these depend on the state in which the lottery is held.

5. Cash 3 Questions and Examples How many numbers are there from 000 – 999? If you choose a straight bet, how many different winning numbers are there? A probability is defined as the number of favorable outcomes (what you want to happen) divided by the total number of possible outcomes. What is the probability you win a Cash 3 straight bet?

6. We have the same 1000 numbers from 000 – 999. This time we are going to place a box bet. For simplicity, we will use three different digits. Our pick is 456. How many different ways could we win a box bet in a Cash 3 game? What is the probability that you win a box bet in a Cash 3 game?

7. Straight vs. Box Which has a greater likelihood of happening: winning a straight bet or a box bet? Which one do you think pays better? Why?

8. Multi-number with two sets of numbers Powerball  Draw 5 white balls out of a drum with 59 white balls and one red ball out of a drum with 35 red balls.  Cost to play: $2.  There are 9 ways to win!  5 white + 1 red wins the Jackpot - odds 1 in 177,223,510  5 white only wins $1,000,000 – odds 1 in 5,153,632.65  4 white +1 red wins $10,000 – odds 1 in 648,975.96

9.  Still winning….  4 white only wins $100 – odds 1 in 19,087.96  3 white + 1 red wins $100 – odds 1 in 12,244.83  3 white wins $7 – odds 1 in 360.14  2 white + 1 red wins $7 – odds 1 in 706.43  1 white + 1 red wins $4 – odds 1 in 110.81  1 red wins $4 – odds 1 in 55.41. These odds are extremely difficult to calculate as they take into consideration many outcomes. We will accept the lottery’s numbers for the purposes of this class.

10. Mega Millions  Draw 5 numbers from 1 to 56 and one number from 1 to 46.  Megaplier cost extra, but can double, triple or even quadruple your winnings.  Cost of ticket: $1 (plus another $1 for megaplier)  11 ways to win!!!  Match all to win the Grand Prize – odds 1 in 175,711,536

11.  Still winning…  Match 5 of first set win $250,000 – odds 1 in 3,904,700.8  Match 4 of first set + second set win $10,000 – odds 1 in 689,064.8471  Match only 4 of first set win $150 – odds 1 in 15,312.5521  Match 3 of first set + second set with $150 – odds 1 in 13,781.2969  Match only 3 of first set win$7 – odds 1 in 306.2510  Match 2 of first set + second set win $10 – odds 1 in 843.7529

12.  Match 1 of first set + second set win $3 – odds 1 in 140.6255.  Match only second set win $2 – odds 1 in 74.8008.  Match two of first set (1 in 18.7501), one of first set (1 in 3.125) or no matches (1 in 1.6622) you win $0.

13. Pay off vs. Expected Value We know we can win the jackpot, or even $1,000,000 in the lottery and this is why we play. This is the pay off that lures us in. Mathematically speaking, the pay off is misleading. Expected value is a way of calculating how much you can expect to win, or lose, over the long range course of the game.

14. Expected value formula If you have three possible outcomes each with probability p1, p2 and p3, and winnings of w1, w2, and w3, respectively, you can find the expected value with the formula:

15. That is, multiply the probability of an outcome by the winnings (or losings) for that outcome. Example: Suppose I play a game with dice. If the number rolled is a 1 or 2, I win $7. If the number rolled is a 3 or 4, I win $3, and if the number rolled is a 5 or 6 I lose my bet of $4. Find the expected value.

16. Another Example You have 10 marbles in a bag: 4 red, 2 blue, 3 orange and 1 yellow. You pay $1 to play the game. You lose your bet if you draw a red, you win $10 if you draw a yellow, you win $5 if you draw a blue, and you win $2 if you draw an orange marble. What is the expected value of this game?