Question
Suppose you bought a Samsung Q900R Series 85 high definition Smart television for $14,999.91.It comes with a manufacturer's warranty, but you have options of getting
Suppose you bought a Samsung Q900R Series 85" high definition Smart television for $14,999.91.It comes with a manufacturer's warranty, but you have options of getting either a 2 Year Plan for $699.99, a 3 Year Plan for $899.99, or a 5 Year Plan for $1,099.99.The repair cost including labor for fixing a cracked television screen is $300.The cost of replacing a backlight on the television is about $150 including labor.Other repair costs are around $500.
Suppose the probabilities of these events happening are as follows: cracked screen = 18%, backlight failure = 9%, other repairs = 4%, and television replacement = 6%.
This formula is provided:
EV = (probability of event 1 happening)(amount of event 1) + (probability of event 2 happening)(amount of event 2) + (probability of event 3 happening)(amount of event 3)
1 - What is the expected value or repairs if you do not purchase any of the extended warranties (show your work for any credit)?
2 - What is the expected value of purchasing the 2-year warranty (show your work for any credit)?
3- What is the expected value of purchasing the 3-year warranty (show your work for any credit)?
4 - What is the expected value of purchasing the 5-year warranty (show your work for any credit)?
5 - Which (if any) of the extended warranties should you purchase?(Explain your answer.)
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