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Which of the Following Warranty Plans Has a Higher Expected

Question 11

Multiple Choice

Which of the following warranty plans has a higher expected value for the customer? Plan A covers all possible problems with 30% probability; Plan B completely covers 30% of the possible problems, and offers no coverage on the remaining 70% of the problems.(Assume the individual payout is about the same on average for each of the problems covered in Plan B compared to those not covered.)


A) Plan A has a higher expected value for the customer.
B) Plan B has a higher expected value for the customer.
C) Plans A and B have the same expected value for the customer.
D) Not enough information to tell.

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