Question

Mrs. James is planning to purchase one of two household appliance contracts. Company A offers a repair contract that covers an unlimited number of repairs for $12.99 per month. Company B charges $75 per repair but does not charge a monthly fee. The table lists the probability, based on customer reviews, of the number of repairs required over one year.
Number of Repairs: 0 1 2 3
Probability: 0.25 0.32 0.29 0.14

The offer from (Company A or B) is more cost-effective than the offer from (Company A or B).

Answer 1

Answer:

Company B's offer is more cost effective

Step-by-step explanation:

Expected no. of repairs:

(0)(0.25) + (1)(0.32) + (2)(0.29) + (3)(0.14)

= 1.32

Cost A: 12.99 × 12 = $155.88

Cost B: 1.32 × 75 = $99