Question

A man is considering buying a one-year warranty for $100, which will cover the $600 replacement cost for his new swimming pool pump. The probability the pump does not break within the first year is 90%.

A) The expected value is −$90, so the man should not buy the warranty.
B) The expected value is $90, so the man should buy the warranty.
C) The expected value is −$40, so the man should not buy the warranty.
D) The expected value is $40, so the man should buy the warranty.

It'd help me out a lot if you explained your answer!

Answer 1

Answer:

C) The expected value is −$40, so the man should not buy the warranty.

Step-by-step explanation:

The expected value is( each value times the respective probability) minus the cost of the item

E = cost * probability + no cost * probability

   It will cost 600 dollars if it breaks * 10 percent chance it breaks

   It will cost nothing if it does not break * 90 percent chance it does not break

E = 600 * .1 + 0*90

E = 60 +0

E = 60

Now we subtract the 100 dollars for the warranty

E - 100

60-100

-40

Our expected cost is -40

Answer 2

C. The expected value is −$40, so the man should not buy the warranty.

May I have brainliest please? :)