Company ABC provides a warranty on a product that it produces. Each year, the number of warranty claims follows a binomial distribution with mean 1.5 and variance 1.125. Company ABC purchases an insurance policy that will reduce its overall warranty claim payment costs. The insurance policy will pay 5000 for each warranty claim received until the end of the year, however, the total annual policy payment will not be greater than 15,000. Calculate the expected amount of annual insurance policy payments to Company ABC.

MATLAB: An Introduction with Applications
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ISBN:9781119256830
Author:Amos Gilat
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Chapter1: Starting With Matlab
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Company ABC provides a warranty on a product that it produces. Each year, the number of
warranty claims follows a binomial distribution with mean 1.5 and variance 1.125.
Company ABC purchases an insurance policy that will reduce its overall warranty claim payment
costs. The insurance policy will pay 5000 for each warranty claim received until the end of the year;
however, the total annual policy payment will not be greater than 15,000.
Calculate the expected amount of annual insurance policy payments to Company ABC.
6724
9957
7288
6991
4110
Transcribed Image Text:Company ABC provides a warranty on a product that it produces. Each year, the number of warranty claims follows a binomial distribution with mean 1.5 and variance 1.125. Company ABC purchases an insurance policy that will reduce its overall warranty claim payment costs. The insurance policy will pay 5000 for each warranty claim received until the end of the year; however, the total annual policy payment will not be greater than 15,000. Calculate the expected amount of annual insurance policy payments to Company ABC. 6724 9957 7288 6991 4110
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