Cost of CD-player =
Cost of additional insurance = per year
Probability of theft is =
probability of no theft =
If there is no theft, then amount paid to insurance is
If there is theft, then amount paid to insurance is which is (cost of CD-player recovered - Cost of additional insurance)
So expected return per year
where is the probability of event(theft or no theft), and is the return amount
Hence the expected return per year is
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