Logo
Home Study Material Contact Search
AI Chat FREE
  1. mathematics
  2. statistics
  3. a cell phone company offers a simple extended warr

A cell phone company offers a simple extended warranty plan. If your phone is damaged, they...

70.2K

Verified Solution

Question

Statistics

A cell phone company offers a simple extended warranty plan. Ifyour phone is damaged, they will repair it for up to $50. If youlose or destroy your phone, they will give you a $200 vouchertowards a new phone. The company believes that 5% of customers willneed the replacement voucher and 10% will request a repair. 1. Ifthe company charges $25 for this extended warranty, what is theexpected value of the profit they will earn? 2. What is thestandard deviation of their profit? 3. Suppose the company collects10 warranty plans on one day. What is the mean of the company'stotal profit? 4. What is the standard deviation of the 10 totalwarranty plans? What assumption does this calculation require? Doyou think this assumption is reasonable? 5. What are the mean andstandard deviation for the profit on a 1000 plans? 6. What do youranswers to the previous question tell you about the company'slikelihood of making a profit? 7. Is the $25 warranty a wisepurchase for you? Given that you will probably buy dozens ofdevices over the next decade, are these types of warranties a wisepurchase for you?

Answer & Explanation Solved by verified expert
4.4 Ratings (773 Votes)
ANSWER 1 Let X denotes the amount of claim customer makes Since X can takes values 50 and 200 with probability 10 and 5 respectively So X 50 200 PX 10 5 EX 50101002005100 So expected loss 15 And premium money as per the question is 25 Thus expected profit 2515 10 2 Standard deviation of expected    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Create a paragraph or two to address the following prompts. What are the steps of the scientific...

Biology
Q

A scientist measured the properties of a newly synthesized gas molecule. At 55.00 degrees C and 2.090...

Chemistry
Q

Compare and contrast sexual and asexual reproduction. Explain relevance to evolution. Be descriptive on each and...

Biology
Q

Consider the following two projects, and assume a company's cost of capital is 15 percent. Find...

Finance
Q

potential energy of electron in the 44 In a sample of radioactive material what fraction...

Physics
Q

In Exercises 47 54 use the figures to find the exact value of each trigonometric...

Geometry
Q

1 point Find a b if a 10 b 7 and the angle between a...

Basic Math
Q

An airliner carries 200 passengers and has doors with a height of 74 in Heights...

Statistics
Q

D 3 8 A candle is burning at a constant rate The height of the...

Algebra
Q

Sheridan had 9,800 shares of 3%, $8 par value preferred stock and 57,000 shares of...

Accounting
Q

Gates Accounting Services (GAS), a sole proprietorship, entered into a new 18-month office space contract...

Accounting
Q

Z Manufacturing Company is a partnership among Yolando Gonzales, Willie Todd, and Linda Walker. The...

Accounting