Waec Model Questions Vol1 2025 Commerce Question 12
Practice objective / multiple choice question 12 from the 2025 Waec Model Questions Vol1 Commerce examination.
A consumer purchases a television for ₦150,000. The seller provides a 2‑year warranty covering repair costs up to ₦30,000. An optional extended warranty for an additional ₦12,000 covers any repair cost for the next 3 years. Historical data shows a 0.25 probability of a repair claim in the first 2 years with an average cost of ₦20,000, and a 0.15 probability of a claim in years 3‑5 with an average cost of ₦25,000. Assuming at most one claim per period and independence, should the consumer buy the extended warranty to minimise expected total cost?
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This is Waec Model Questions Vol1 2025 Commerce Question 12. It is one of the objective questions from the 2025 Waec Model Questions Vol1 Commerce examination.
Difficulty level: Hard .
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