Question

Rajesh has just bought a VCR from a shop and shop offers after sales services contract for Rs. 1000 for the next five years. Considering the experience of VCR users, the following distribution of maintenance for the next five years is formed

The expected value of maintenance cost is

• A. Rs. 800
• B. Rs. 770
• C. Rs. 700
• D. Rs. 900

Answer 1

Answer: (B)

Rs. 770

Answer 2

The expected maintenance cost is given by:

$$E[X] = \sum (x \times p)$$

Substituting the values:

$$E[X] = (0\times0.35)+(500\times0.25)+(1000\times0.15)+(1500\times0.10)+(2000\times0.08)+(2500\times0.05)+(3000\times0.02)$$ $$E[X] = 0 + 125 + 150 + 150 + 160 + 125 + 60 = 770$$

Therefore, the expected value of maintenance cost is Rs. 770.