An lg dishwasher, which costs $800, has a 20% chance of needing to be replaced in the first 2 years of purchase. a two-year extended warranty costs $112.10 on a dishwasher. what is the expected value of the extended warranty assuming it is replaced in the first 2 years?

The expected value of the extended warranty assuming it is replaced in the first 2 years is $687.90.

Explanation:

since the dishwasher has a 20% chance of needing to be replaced in the first 2 years, then:

the value of warranty = 20%×$800 - $112.10

                                   = $160 - $112.10

                                   = $47.10

when it is assumed that replacement is done in first two years, then the value of warranty increases to $800 - $112.10 = $687.90

Therefore, the expected value of the extended warranty assuming it is replaced in the first 2 years is $687.90.

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