Suppose you work for a company that manufactures

Last updated: 7/12/2022

Suppose you work for a company that manufactures electronics. The development analysts estimate that 1% of their flagship product will fail within 2 years of the purchase date, with a replacement cost of $ 1600. A newly hired associate at the company proposes to charge $6 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 = b. Interpret the expected value in complete sentences. (See Example 4.3 in the textbook for an example of this)