With homeowners buying valuable appliances such as plasma TVs and electronic appliances, there’s more concern about the cost of being hit by lightning.11 Suppose that you’ve just bought a $4,000 fat-screen TV. Should you also buy the $50 surge protector that guarantees to protect your TV from electric surges caused by lightning?
(a) Let p denote the probability that your home is hit by lightning during the time that you own this TV, say five years. In order for the purchase of the surge protector to have positive long-term value, what must the chance of being hit by lightning be?
(b) There are about 100 million households in the United States, and fewer than 10,000 get hit by lightning each year. Do you think the surge protector is a good deal on average? Be sure to note any assumptions you make.

  • CreatedJuly 14, 2015
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