A company estimates that 0.9% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $150.

If they offer a 2 year extended warranty for $18, what is the company's expected value of each warranty sold?

Respuesta :

The expected value of each warranty sold is -$16.65, indicating a loss for the company.

(0.009 * $150 - $18 = -$16.65)