Question

A large retailer of personal computers issues a warranty contract with each computer that it sells. The warranty covers any cost to repair or replace a defective computer within the first 30 days of purchase. 40% of all claims are easily resolved with minor technical help and do not involve any cost to replace or repair. If a claim involves some cost to replace or repair, the claim size is distributed as a Weibull with parameters τ = 1/2 and θ = 30. Which of the following statements are true? (a) The expected cost of a claim is $60. (b) The survival function at $60 is 0.243. (c) The hazard rate at $60 is 0.012.

Answer 1