Data Analysis for Modeling
an extended warranty to buyers of its sport-utility vehicle. The extended
warranty covered defects occurring after the initial three-year warranty
expired. Of the 10,000 people who bought the sport-utility in the first year of
the program,15 percent purchased the extended warranty. In the Warranty
Department, you have recently received data on a random sample of 200 of the
cards sold in the first year that the extended warranty was available. For this
sample, the average extended warranty expenditure per car for the one-year
period after the initial warranty elapsed was $350, with a standard deviation
of $100.
a. What is a
95 percent confidence interval for the mean one-year extended-warranty
expenditure per automobile?
b. At its introduction,
the extended warranty was priced at$445per year per automobile. Compute a95
percent confidence interval for the one-year profitability of the extended
warranty.
c. How
large a same would the Warranty Department require if it wanted its95 percent
confidence interval for the mean warranty expenditure to be no more than + $5?
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