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A company estimates that 0.1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $500. If they offer a 2 year extended warranty for $46, what is the company's expected value of each warranty sold?

A company estimates that 0.1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $500. If they offer a 2 year extended warranty for $46, what is the company's expected value of each warranty sold?

Algebra & Trigonometry with Analytic Geometry
Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter10: Sequences, Series, And Probability
Section: Chapter Questions
Problem 35T
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A company estimates that 0.1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $500. If they offer a 2 year extended warranty for $46, what is the company's expected value of each warranty sold?
Transcribed Image Text:A company estimates that 0.1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $500. If they offer a 2 year extended warranty for $46, what is the company's expected value of each warranty sold?
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