Problem 16-03
Grear Tire Company has produced a new tire with an estimatedmean lifetime mileage of 36,500 miles. Management also believesthat the standard deviation is 5000 miles and that tire mileage isnormally distributed. To promote the new tire, Grear has offered torefund some money if the tire fails to reach 30,000 miles beforethe tire needs to be replaced. Specifically, for tires with alifetime below 30,000 miles, Grear will refund a customer $1 per100 miles short of 30,000.
- For each tire sold, what is the expected cost of the promotion?If required, round your answer to two decimal places.
- What is the probability that Grear will refund more than $50for a tire? If required, round your answer to three decimalplaces.
- What mileage should Grear set the promotion claim if it wantsthe expected cost to be $2.00? If required, round your answer tothe hundreds place.
miles
