Respuesta :
Answer:
It is worth $4 to insure the mailing.
Step-by-step explanation:
The random variable X can be defined as the money value.
The PDA costs, $414.
It is provided that there is a 3% chance it will be lost or damaged in the mail.
So, there is 97% chance it will not be lost or damaged in the mail.
The insurance costs $4.
If the PDA is lost or damaged in the mail when there is no insurance the money value would be of -$414.
And if the PDA is lost or damaged in the mail when there is an insurance the money value would be of $414 - $4 = $410.
Compute the expected value of money as follows:
[tex]\text{E (X)}=(0.97\times 410)+(0.03\times -414)[/tex]
[tex]=397.7-12.42\\=385.28[/tex]
The expected value of money in case the PDA is lost or damaged in the mail or not is $385.28.
Thus, it is worth $4 to insure the mailing.
