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Don't quite understand the calculation of risk. Watch

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    Howdy , I don't get the below attachment. I can calculate it using the formula but I don't get what the risk number means.

    For question b(i) and (ii), the P x C = risk is 37.5 but is this £37.5 a year or just a number to assess the risk? I am stuck in trying to compare it to the insurance cost of £30 a year.

    Could someone explain it please?

    Thanks
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    (Original post by marcus888)
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    The meanings will be the same as in part a).

    Risk seems to mean "expected cost".

    The 37.5 is the expected cost of repairs required in total over the whole three years.

    With a 25% failure rate, the chances of more than one break down is considerable, but for the sake of the question, I think you're going to have to assume, if it breaks down then it will only do so once.

    Also, as I read it, the insurance cost is not £30 per year, but rather £30 in total to cover the whole three years.
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    What an awful definition of risk.
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    (Original post by ghostwalker)
    The meanings will be the same as in part a).

    Risk seems to mean "expected cost".

    The 37.5 is the expected cost of repairs required in total over the whole three years.

    With a 25% failure rate, the chances of more than one break down is considerable, but for the sake of the question, I think you're going to have to assume, if it breaks down then it will only do so once.

    Also, as I read it, the insurance cost is not £30 per year, but rather £30 in total to cover the whole three years.
    Ah thanks for clearing that up. Makes sense now .
 
 
 
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