Anticipated repair costs and associated probabilities


You purchase a new motor vehicle and are considering purchasing an extended bumper-to-bumber warranty. The extended warranty adds 3 years of protection to the basic warranty and costs $3,000. The following probability distribution shows the anticipated repair costs and associated probabilities during the extended warranty's 3 additional years of protection:

REPAIR COSTSPROBABILITY
$10,000 0.10
$5,000 0.20
$2,000 0.45
$1,000 0.25

Should you purchase the extended warranty? Please show reasoning/how you came up with your answer!

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Basic Statistics: Anticipated repair costs and associated probabilities
Reference No:- TGS0727129

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