Suppose Your Firm Is Buying Five New Computers

question 45

Short Answer

Suppose your firm is buying five new computers. The manufacturer offers a warranty to replace any computer that breaks down within three years. Suppose there is a 25% chance that any given computer breaks down within three years.
A) What is the probability that exactly one of the computers breaks down within five years?
B) What is the probability that at least one of the computers breaks down within five years?
C) Suppose the warranty for five computers costs $700, while a new computer costs $600. Is the warranty less expensive than the expected cost of replacing the broken computers?

• A) What is the probability that exactly one of the computers breaks down within five years?
• B) What is the probability that at least one of the computers breaks down within five years?
• C) Suppose the warranty for five computers costs $700, while a new computer costs $600. Is the warranty less expensive than the expected cost of replacing the broken computers?

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