Definition of a low-mileage car

Reference no: EM13103280

Most four-year automobile leases allow up to 60,000 miles. If the lessee goes beyond this amount, a penalty of 20 cents per mile is added to the lease cost. Suppose the distribution of miles driven on four-year leases follows the normal distribution. The mean is 52,000 miles and the standard deviation is 5,000 miles.

1. What percent of the leases will yield a penalty because of excess mileage?

2. If the automobile company wanted to change the terms of the lease so that 25 percent of the leases went over the limit, where should the new upper limit be set?

3. One definition of a low-mileage car is one that is 4 years old and has been driven less than 45,000 miles. What percent of the cars returned are considered low-mileage?

Reference no: EM13103280

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