Joseph just bought a brand new cell phone and a warranty for the cell phone. The warranty cost 300 euros and is worth 800 euros if his phone breaks. Joseph estimates that there is a 20% chance of his phone breaking.
Joseph calculates the expected value of buying the warranty to be -140 euros.
TAT
Which of the following statements are true?
Choose all answers that apply:
Joseph will certainly lose value from the warranty.
Joseph will certainly gain value from the warranty.
If Joseph was going to buy a large number of phones, and he bought the warranty on each phone,
he should expect to lose value from the warranties.