Find the expected amount that the insurer will pay

Reference no: EM131001317

The manufacturer of a television set costing 1000, offers a guarantee to repair or replace the set for free for the first year. The number of defective sets follows a Poisson distribution with mean 4. Half the defective sets require replacement and half require a repair costing 500. The manufacturer purchases an insurance policy that will cover the total cost of this guarantee above 1500. (So, for example, if there were four defective sets and each required replacement the insurer would pay 2500 to the manufacturer.) Find the expected amount that the insurer will pay.

Reference no: EM131001317

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