Allison bought a Blu-ray DVD player from the store for $300 that came with a one-year warranty. At checkout, she was asked if she would like to buy a two-year extended warranty that would replace her DVD player with an identical one if it broke down. The extended warranty costs $50, and Allison expects that the DVD player will depreciate in value by $50 every year as new models come out (this means a replacement would cost $200 after 2 years and $150 after 3 years). Suppose Allison pays for the purchase of the extended warranty with her credit card, which has a 10 percent interest rate. Also assume that Allison knows there is a 10 percent chance that the DVD player will break in any given year. The present value of buying the extended warranty is $ places and use a minus sign if necessary.) (Round your response to two decimal
Allison bought a Blu-ray DVD player from the store for $300 that came with a one-year warranty. At checkout, she was asked if she would like to buy a two-year extended warranty that would replace her DVD player with an identical one if it broke down. The extended warranty costs $50, and Allison expects that the DVD player will depreciate in value by $50 every year as new models come out (this means a replacement would cost $200 after 2 years and $150 after 3 years). Suppose Allison pays for the purchase of the extended warranty with her credit card, which has a 10 percent interest rate. Also assume that Allison knows there is a 10 percent chance that the DVD player will break in any given year. The present value of buying the extended warranty is $ places and use a minus sign if necessary.) (Round your response to two decimal
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Allison bought a Blu-ray DVD player from the store for $300 that came with a one-year warranty.
At checkout, she was asked if she would like to buy a two-year extended warranty that would
replace her DVD player with an identical one if it broke down. The extended warranty costs $50,
and Allison expects that the DVD player will depreciate in value by $50 every year as new models
come out (this means a replacement would cost $200 after 2 years and $150 after 3 years).
Suppose Allison pays for the purchase of the extended warranty with her credit card, which has a
10 percent interest rate. Also assume that Allison knows there is a 10 percent chance that the
DVD player will break in any given year.
The present value of buying the extended warranty is $
places and use a minus sign if necessary.)
(Round your response to two decimal
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