Question

Part 2 of 2 - Part 2

Carlie needed a personal computer (PC) for school but her budget was tight, so she decided on a used machine. After some searching, she was down to two possibilities. One she had found in a national franchized computer store, where she could purchase the PC for $800 with a one-year guarantee. But she was intrigued by a second possibility: a local charity store was offering a used machine that had been donated (exactly the same model as in the store) for $500.

Carlie talked to a computer repair specialist, who said the principal problem with this model of PC was the hard drive, which was prone to failure: he estimated that half of the PCs of this model and age would require a new drive. He offered to test the computer and check the condition of the drive for $60. If the drive was no good, a new drive could be fitted for $300 and would be guaranteed for one year. He added a qualification that his testing was not perfect: about 25% of drives that passed his testing failed soon afterwards requiring a new drive ($300) plus a service charge of $100 for diagnosing the problem (a cost that has to be paid with the fitting of a new drive).

Please only enter an integer if a numerical answer is required.

Question 8 of 12

10.0 Points

The expected cost of buying the second hand computer from charity is   

Question 9 of 12

10.0 Points

Carlie would be better off to buy the computer with a one-year guarantee for $800.

True

False

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Question 10 of 12

10.0 Points

Carlie would expect to save $  with the test before purchase.

Question 11 of 12

10.0 Points

If the second hand computer passes the test, then its expected cost is $  .

Question 12 of 12

10.0 Points

Carlie should

• A. buy the second hand computer only if it passes the test.

• B. buy the second hand computer without taking the test.

• C. still buy the second hand computer even if it fails the test.

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Answer 1

Question 8.

Cost from showroom = 500

cost of checking(absolutely necessary) = 60

Now there is 50%chance that he will examine it as good.

those not good get replaced cost 300

Out of 50% good he examined good 25% are bad . so eventually 1/2*1/4 of the cost will be used

which is 300+100, 100 fees , 300 cost of hard disk

Expected Cost = 500+60+1/2*1/4*400+1/2*300 =760

Question 9

False, expected cost of second hand computer is 760

Question 10

Expected saving = 1/2*(300+100)=200

Question 11

Expected cost = 500+60+1/4*(300+100)=660

Question 12

Option A as expected cost is 660 if it passes the test= 500+60+1/4*400=660