Hi I'd like to check my answer to this what I believe is a binomial problem whose statement is in the below paragraph. so I calculated the probability of having 1% success rate or less which was 5 success in 12 trials so I said the price should be $150 =50 + 20x5
Could someone tell me if my conclusion is correct because I'm pretty shakey on how this problem should be approached.
The problem statement is below.
an audio player uses a low quality hard drive. The initial cost of building the player is $50. The hard drive fails with probability 1/12 with each month of use. The cost to repair the hard drive is $20. If a 1 year warranty is offered, how much should the manufacturer charge so that the chance of losing money on a player is 1% or less.