Question

A service that repairs TV's and sell maintenance agreement for $9 a yr. the average cost for repairing a TV is $39 and 3 in every 100 people who purchased maintenance agreements have TV that require repair
Find the services expected profit per maintenance agreement

Answer 1

prob(repair) = 3/100
expected cost = (3/100)($39) = $1.17
cost of agreement = $9.00
so profit per agreement = 7.83
Percentage of profit = 7.83/9 = .87 or 87%
(not bad, that is why I never buy these agreements)

another way to look at it.
Suppose 100 people bought the agreement
so they took in $900
but only 3 needed repairs, so the were out by $117
which is still a profit of $783
which is a percentage of 783/900 = .87 or 87%