2. Orko's Kopy Orko's Kopy has two service contract options for its photocopy machines: Option A: Pay $1,000 for each failure (repair visit) Option B: Pre-pay $1,500 for the first three failures (no refund) and pay $200 for each additional failure Which option should Orko's Kopy pick to minimize its maintenance cost per machine? The relative frequency for the number of times a Xerox photocopy machine fails per year is: If contributions are made monthly, the average amount of "new money" invested for a whole year is roughly of the full year's contribution. This means the annual contribution gets approximately of the annual market return. Number of Failures Relative Frequency 0 22% 1 30% 2 25% 3 3 13% 4 9% 5 1%