Step-by-step explanation:
that is quite a lot of failing TVs.
if 5% are failing, this means you have a "chance" of 5/100 = 1/20 that your TV is among them.
that means the expected costs for replacement in the next 3 years are
1750 × 1/20 = 175/2 = $87.50
minus the $200 replacement plan the expected value is of course negative :
87.5 - 200 = -$112.50
and if your TV breaks after more than 3 years, the expected value is actually -1750 - 200 = -$1,950
which is the principle of replacement plans, and why I never buy one.
but sure, for the 5% with broken TVs this pays off big time (it is kind of a lottery).
