Explanation Given: The cost of a three-year extended warranty is $ 80 on plasma TV, the 24% of these plasma TVs require repairs within the first three years, and the average cost of a repair is $ 400 . Calculation: The total numbers of possible outcomes are N = 2 , that is the TV will require repair or the TV will not require repair. If the TV requires repair under the warranty Joe does not spend $ 400 on the repair and he saves, $ 400 − $ 80 = $ 320 . If the TV does not require repair Joe loses $ 80 . Construct the table that contains the pay offs with their probabilities. Outcome TV requires repair TV does not require repair Gain $ 400 − $ 80 = $ 320 ( $ − 80 ) Probability P 0

Excursions In Modern Mathematics, 9th Edition

9th Edition

ISBN: 9780134494142

Author: Tannenbaum

Publisher: PEARSON

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Chapter 16, Problem 65E

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Chapter 16, Problem 64E

Chapter 16, Problem 66E

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Chapter 16 Solutions

Excursions In Modern Mathematics, 9th Edition

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Joe should buy extended warranty or not.

Solution Summary: The author explains that a three-year extended warranty costs 80 on plasma TVs, and the average cost of repairs within the first three years.

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