Help with stats! A relay microchip in a telecommunications satellite has a life expectancy that follows a normal distribution with a mean of 92 months and a standard deviation of 3.1 months. When this computer-relay microchip malfunctions, the entire satellite is useless. A large London insurance company is going to insure the satellite for 50 million dollars. Assume that the only part of the satellite in question is the microchip. All other components will work indefinitely. (c) If the satellite is insured for 84 months, what is the expected loss to the insurance company?

Question

Help with stats! A relay microchip in a telecommunications satellite has a life expectancy that follows a normal distribution with a mean of 92 months and a standard deviation of 3.1 months. When this computer-relay microchip malfunctions, the entire satellite is useless. A large London insurance company is going to insure the satellite for 50 million dollars. Assume that the only part of the satellite in question is the microchip. All other components will work indefinitely.  (c) If the satellite is insured for 84 months, what is the expected loss to the insurance company?

anonymous · Answer

im not sure how to set up this problem

kropot72 · Answer

You need to find the probability that the chip will fail before the 84 month insurance period ends.
Do you know how to find the z-score for 84 months?

anonymous · Answer

The probability is .0049

anonymous · Answer

How do I use that to calculate the amount of $?

kropot72 · Answer

50 million dollars times 0.0049 = $expected loss

kropot72 · Answer

$$E(loss)=\$50\times 10^{6}\times 0.0049=......$$

anonymous · Answer

Ooh got it, thank you so much!

kropot72 · Answer

You're welcome :)