The following table provides the expected repair cost of a new television and respective probabilities (likelihood) for 5 years after purchase.

Type of Repair

Probability

Repair Cost

None

0.80

$0

Minor

0.15

$300

Major

0.03

$700

Catastrophic

.02

$1,500

a-What is the probability of any failure that require repair in the next 5 years?

b-What is the expected repair cost? What is the Standard deviation of repair cost?Hint: Use Excel.

c-If the cost of purchasing a 5-year warranty is $129, calculate the expected gain or loss for a consumer that purchase this warranty. Would you recommend purchasing a warranty? Why?

d-Would you a buy 5-year warranty if it costs $90? Why?