The life time X of a component, costing $1000, is modelled using an exponential distribution with...

The life time X of a component, costing $1000, is modelled using an exponential distribution with a mean of 5 years. If the component fails during the first year, the manufacturer agrees to give a full refund. If the component fails during the second year, the manufacturer agrees to give a 50% refund. If the component fails after the second year, but before the fifth year the manufacturer agrees to give a 10% refund.

(a) What is the probability that the component lasts more than 1 year?

(b) What is the probability that the component lasts between 2 years and 5 years?

(c) A particular component has already lasted 1 year. What is the probability that it will last at least 5 years, given it has already lasted 1 year?

(d) If the manufacturer sells one component, what should they expect to pay in refunds?

(e) If the manufacturer sells 1000 components, what should they expect to pay in refunds?

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Expert Solution

milcah answered 8 months ago

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