document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=313857>Question 313857</A>: <I><SPAN STYLE=\"word-break: break-all;\"> As a birthday gift, you are mailing a new personal digital assistant to your cousin in Toledo. The PDA cost $250. There is a 2 percent chance it will be lost or damaged in the mail. Is it worth $4 to insure the mailing. Explain, using the concept of expected value. </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #224402 by </B><A HREF=/tutors/aboutme.mpl?userid=stanbon><B>stanbon(75887)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=stanbon><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/images/nopicture.jpg><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=224402\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\">  As a birthday gift, you are mailing a new personal digital assistant to your cousin in Toledo. The PDA cost $250. There is a 2 percent chance it will be lost or damaged in the mail. Is it worth $4 to insure the mailing. Explain, using the concept of expected value.<BR>\n" );
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document.write( "Let random number \"x\" be value to the purchaser.<BR>\n" );
document.write( "Random Number Values: -4 , +246<BR>\n" );
document.write( "Corresponding Probs:: 0.98, 0.02<BR>\n" );
document.write( "----<BR>\n" );
document.write( "E(x) = 0.98(-4)+ 0.02*246<BR>\n" );
document.write( "= -3.80 + 4.92<BR>\n" );
document.write( "= $1.12<BR>\n" );
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document.write( "The expected value is positive so it is a good buy.<BR>\n" );
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document.write( "Cheers,<BR>\n" );
document.write( "Stan H. </SPAN>\n" );
document.write( "</TD></TR></TABLE>\n" );