Expected Value- Probability

Question

A company estimates that 1% of their products will fail after the original warranty within 2 years of the purchase, with a replacement cost of $500.

If they want to offer a 2 year extended warranty, what price should they charge so that they'll break even (in other words, so the expected value will be 0)

Answer 1

returns/sold=%; Wouldn't hurt to make something from the purchase of the warenty.

sold*price*%*500=return/cost

/

sold items=even