Question

A probability problem about expected values generated by http://saab.org

Answer 1

I'm not familiar with these distributions, but after looking on wikipedia i found the following formula for a cummulative (CDF) of an exponential probability. 1 − e^(−λx)

So, if for λ we take 1/10 (for the ten years). Then for the first 5 years we have 1-e^(-1/10*5) = 0.393469 (The chance of having to back back the full amount)
and for the 6,7,8,9,10th years we have (1-e^(-1/10*10)-(1-e^(-1/10*5))) = 0.238651 (the chance of having to pay back half the amount)

So in total the company can expect to pay back 0.393469*400*1000 + 0.238651*400*500 which is 205118, so answer b

Answer 2

Here is the solution generated by http:/saab.org

Answer 3

Yes, basically the same then.

Answer 4

Theirs looks a bit more clean, but the result is the same.