es s18/ 07.expectedvalue 1/2 07.ExpectedValue 1: Problem 2 (1 point) purchased a

Question

es s18/ 07.expectedvalue 1/2 07.ExpectedValue 1: Problem 2 (1 point) purchased a personal computer, which she expects will serve her for the next two years. The owner has been told that r buy a surge suppressor to provide protection for her new hardware against possible surges or varia ty to damage the computer. The amount of damage to the computer depends on the strength of the surge. It has been estimated that there is a 2% chance of incurring 450 dollar damage, 6 next two years. An nexpensive suppressor % chance o incurring 300 dollar damage, and 13% chance of ncum g 125 dollar damage rom a surge within the which would provde protection for only one surge. can be purchased. How much should the owner be wiling to pay if she makes decisions on the basis of expected value? Expected value You have attempted this problem 0 times You have unlimited attempts remaining. Email instructor

Explanation / Answer

owner should be willing to pay =expected damage amount =0.02*450+0.06*300+0.13*125=$ 43.25

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