Jerry Is Interested in Purchasing a Washing Machine

question 57

Essay

Jerry is interested in purchasing a washing machine.The price of the machine is $500,and it comes with a 1-year warranty.The probability that the machine will break down is 20 percent every year.If the machine breaks down in the second year and Jerry holds a warranty,he receives a new washing machine worth $400 that year.If the machine breaks down after 3 years and he holds a warranty,he receives a new machine that is worth $300 after the third year.The price of a warranty for 3 years is $150.The market interest rate is 5 percent.Is buying the warranty a good investment for Jerry? Explain your answer.Show all the necessary calculations.

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Definitions:

Crustal Blocks

These are large areas of the Earth's crust that have moved together or apart due to tectonic activity.

Isostatic Adjustment

The equilibrium adjustment of the Earth's crust due to changes in load (such as the melting of glaciers), affecting the crust's vertical movement.

Significant Erosion

The process whereby soil, rock, and other surface material are removed from one location and transported elsewhere, typically by wind, water, or ice, in a manner that noticeably alters the landscape.

Mountain

A natural elevation of the Earth's surface rising significantly above the surrounding landscape, often formed through tectonic forces or volcanism.