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Suppose you work for a company that manufactures electronics. The development analysts estimate that 2% of...

Suppose you work for a company that manufactures electronics. The development analysts estimate that 2% of their flagship product will fail within 2 years of the purchase date, with a replacement cost of $ 1300.

A newly hired associate at the company proposes to charge $ 18 for a 2 year warranty.

a. Compute the expected value of this proposal. Let X be the amount profited or lost (by the company) on the warranties and P(X) is the probability. E=E=

math   Statistics-And-Probability   
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Answer #1

The probability that their flagship product will fail within 2 years of the purchase date is .

The cost of 2 year warranty is $18.

The expected value of this proposal is

The company suffers a loss.

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