7) Suppose that an automobile company provides a 3-year warranty on the cars it sells. Suppose they anticipate that one

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7 Suppose That An Automobile Company Provides A 3 Year Warranty On The Cars It Sells Suppose They Anticipate That One 1 (84.45 KiB) Viewed 49 times

7) Suppose that an automobile company provides a 3-year warranty on the cars it sells. Suppose they anticipate that one quarter of all cars it sells will have no warranty repairs, half of the cars will have minor warranty repairs which cost $200 a car to repair, one fifth of the cars will have moderate repairs costing $500 a car to repair, and finally the remaining 5% of the cars will have major warranty repairs costing $1000 a car to repair. a) Using this information, write out the probability distribution for X = cost of a repair. Make sure you list the possible values X can take on and the associated probabilities. b) What is the expected value of these warranty repair costs per car to the company? c) What is the variance of warranty repair costs per car?