Suppose you buy a AndrIphone (an invented phone) for the price of $499. The warranty is a two-year plan that will cost you $100. You were able to find some figures on the phone and discover that 7% of users file a battery-failure claim, 4% file a general malfunction claim, and the rest do not file any claim at all. Suppose the plan coverage only you to file at most one claim over the warranty period. A battery-failure claim will benefit you $125, the cost of a new battery. The general malfunction claim will replace the device, hence giving you a benefit of $499.