Joe is buying a new plasma TV at Circuit Town. The salesman offers Joe a three-year extended warranty for $60. The salesman tells Joe that 24% of these plasma TVs require repairs within the first three years, and the average cost of a repair is $300. Should Joe buy the extended warranty? Explain your reasoning.

1. Joe should buy the extended warranty. The warranty has an expected value of $ ?

2. Joe should not buy the extended warranty. The warranty has an expected value of $ ?

Answer rating: 100% (QA)

To determine whether Joe should buy the extended warranty we can calculate the expected cost with an... View the full answer