Question

Matt started his own company where he rents used textbooks to struggling college students at multiple Universities for a low rate. Over the last few years Matt has been able to collect a total of 250 textbooks for his business at Temple University. Unfortunately, students can be irresponsible and lose their textbook rental causing a loss for Matt. Based on past information Matt has collected the data below for Temple University based on losses per semester. #
of losses per semester Probability
0 0.08
5 0.16
10 0.28
15 0.32
20 0.14
25 0.02
a. Calculate the expected frequency of losses per semester. (2 points)
b. Calculated the variance. (2 points)
Now assume that when losses do occur, they are non-random and losses equal $60.
c. Calculate the expected losses per semester? (2 points)
d. Calculate the expected losses for ALL textbooks per semester. (1 point)
e. Calculate the expected losses for ALL textbooks for the next 2 school years (4 semesters). (1 point)

Answer 1

Answer:

a. Expected frequency of losses per semester = 0*0.08 + 5*0.16 + 10*0.28 + 15*0.32 + 20*0.14 + 25*0.02

Expected frequency of losses per semester = 11.7 losses per semester

b. Variance = (0-11.7)²*0.08 + (5-11.7)²*016 + (10-11.7)²*0.28 + (15-11.7)²*0.32 + (20-11.7)²*0.14 + (15-11.7)²*0.02

Variance = 10.9512 + 7.1824 + 0.8092 + 3.7848 + 9.6446 + 3.5378

Variance = 35.61

c. As losses equal $60, expected losses per semester = 11.7*$60 = $702

d. Expected losses of all textbooks per semester = 250*11.7*$60 = $175,500