An electronics store gives customers the option of purchasing a protection plan when customers
buy a new refrigerator. The customer pays $125 for the plan, and if their refrigerator is damaged
or stops working, the store will replace it for no additional charge. The store knows that 3% of
customers who buy this plan end up needing a replacement that costs the store $1,500 each.
Here is a table that summarizes the possible outcomes from the store's perspective:
Replacement?
Yes
No
Cost Net gain (X)
$1,500
$0
-$1,375
$125
Let X represent the store's net gain from one of these plans.
Calculate the expected net gain E(X).
E(X)=
dollars