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Suppose that the life of an appliance has an exponential distribution with mean 4 yrs. The warranty returns 100% of the price if the appliance
Suppose that the life of an appliance has an exponential distribution with mean 4 yrs. The warranty returns 100% of the price if the appliance fails in the first year, 75% of the price if it fails in the second year, 50% of the price if it fails in the third year, and nothing after that. What is the expected value of the payment on the warranty if the appliance costs $5000?
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