A company estimates that 0.4% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $300.

Question

If they offer a 2 year extended warranty for $46, what is the company's expected value of each warranty sold?

Answer 1

.004(-300)+.996(46)

Answer 2

iS IT 44.616

Answer 3

Yes

Answer 4

john failed, thanks for the way to figure it out, used it on my online quiz and was wrong.