document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1171280>Question 1171280</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Suppose the warranty period on your family's new computer is about to expire and you are debating about whether to buy a one-year maintenance contract for $130. If you buy the contract, all repairs for one year are free. Consumer information shows that 23% of the computers like yours require an annual repaid that costs $320 on the average. What is the expected value of buying the maintenance contract? </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #796213 by </B><A HREF=/tutors/aboutme.mpl?userid=ikleyn><B>ikleyn(52776)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=ikleyn><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/cgi-bin/show-face.mpl?user=ikleyn><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=796213\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> .\r<BR>\n" );
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document.write( "Your expected value of buying the maintenance contract is \r<BR>\n" );
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document.write( "    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.23*320 - 130 dollars = -56.40 dollars.\r<BR>\n" );
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document.write( "In wording form :\r<BR>\n" );
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document.write( "&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you do not buy the contract, then with the probability of &nbsp;0.23 &nbsp;you will be forced to pay &nbsp;$320 for repair, &nbsp;which is &nbsp;$73.60.\r<BR>\n" );
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document.write( "&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you do buy the contract, &nbsp;you pay &nbsp;$130 &nbsp;for contract, &nbsp;avoiding the fees for repair.\r<BR>\n" );
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document.write( "&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In other words, &nbsp;buying the contract, &nbsp;you give them $130, &nbsp;but avoid to lose $73.60.\r<BR>\n" );
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document.write( "&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So, &nbsp;you pay &nbsp;$56.40 &nbsp;dollars to the insurance company for your &nbsp;\"peace in mind\".\r<BR>\n" );
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document.write( "&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$56.40 is the profit of the insurance company - it is for what they established their business.\r<BR>\n" );
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document.write( "<U>ANSWER</U>. &nbsp;&nbsp;Your expected value of buying the maintenance contract is -56.40 dollars.\r<BR>\n" );
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document.write( "&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notice the sign &nbsp;&nbsp;\" - \" &nbsp;&nbsp;before the number.\r<BR>\n" );
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document.write( " </SPAN>\n" );
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