Question

The probability distribution gives the potential cost of routine maintenance and major repairs in the first 5 years you own a car.Cost over 5 years0$500$1,000$1,500$2,000Probability of cost incurred0.190.670.090.040.01What is the expected cost of routine maintenance and major repairs for the 1st 5 years you own the car? (Recall: the expected value is the mean.)A. 505B. 5000C. 101D. 1000

Answer 1

Answer:

A. 505

Step-by-step explanation:

$\begin{array}{cc}cost&probability\\\ 0&0.19\\\ 500&0.67\\\ 1,000&0.09\\\ 1,500&0.04\\\ 2,000&0.01\end{array}$

The expected cost is given by the sum of each possible outcome's value multiplied by its probability:

$EC = 0*0.19+ \ 500*0.67+ \ 1,000*0.09+ \ 1,500*0.04+ \ 2,000*0.01 \\EC=\ 505$

The expected cost of routine maintenance and major repairs for the 1st 5 years you own the car is $505.