As a birthday gift, you are mailing a new personal digital assistant (PDA) to your cousin in Toledo. The PDA cost $414. There is a 3 percent chance it will be lost or damaged in the mail. Is it worth $4 to insure the mailing?Explain, using the concept of expected value.

It is worth $4 to insure the mailing.

Step-by-step explanation:

The random variable X can be defined as the money value.

The PDA costs, $414.

It is provided that there is a 3% chance it will be lost or damaged in the mail.

So, there is 97% chance it will not be lost or damaged in the mail.

The insurance costs $4.

If the PDA is lost or damaged in the mail when there is no insurance the money value would be of -$414.

And if the PDA is lost or damaged in the mail when there is an insurance the money value would be of $414 - $4 = $410.

Compute the expected value of money as follows:

The expected value of money in case the PDA is lost or damaged in the mail or not is $385.28.

Thus, it is worth $4 to insure the mailing.

1. 3.4/4

2. 0.8/7

3. 0.5 x 3

4. 0.9 x 6

5. 10.8

6. 2.35

7. 0.567

8. 9.35

9. 0.02

10. 0.06

11. 0.16

12. 0.42

13. 0.63

14. 5.6

15. 8.1

16. 9.9

17. 0.28

18. 0.48

19. 0.27

20. 0.49

21. 0.45

22. 0.72

23. 0.9

24. 0.88

25. 0.75

26. 0.16

27. 0.328

28. 0.495

29. 0.72

30. 1.068