Submittedby:

Sahil (PGP07089)

Group 5

Sanghmitra (PGP07090)
Satinder (PGP07091)
Satyendra (PGP07092)
Sharikh (PGP07093)
Shikhar(PGP07094)
Shivam(PGP07095)
Shreya(PGP07096)
Shubham (PGP07097)

Case 5.1 Extended Warranty

Types ofRepair

Probability

RepairCost

None

0.76

$0

Minor

0.13

$80

Major

0.08

$320

Catastrophic

0.03

$500

Data Given
Warrantyofferprice=$78
Failurerate=20.4%overthreeyears

Problem Statement/s

Question1:Calculateandinterprettheexpectedvalueof
therepaircosts
Question2:Analysisofexpectedgainsorlossesfora
consumerwhobuystheextendedwarranty
Question3:Determinethepsychographicprofileofthe
consumer(riskneutral,riskaverse,both)

Solutions

E(x)

,

=0.7*0+0.13*80+0.06*320+0.03*500
=$51

Sellingpriceofwarrantyis$74andtheexpectedrepair
costsoverthegivenwarrantyperiodis$51anda
consumerbuyingthewarrantywilllose$23
Onlyariskaverse consumerwillbuythewarrantyto
avoidtherisksassociatedwiththedamage

Case 5.2 Smoking Habits

NewYorkcityyouthriskbehavioursurveydata:
Smokingrate(2007)=8.5%
Smokingrate(2001)=17.6%
Smokingrate(1997)=23%

Problem Definition/s

Question1:Probabilitythatatleast1outof10teenagersis
smokingin2007
Question2:Probabilitythatatleast1outof10teenagersis
smokingin2001
Question3:Probabilitythatatleast1outof10teenagersis
smokingin1997
Question4:Commentonthechangingtrend

Solutions
P(atleastonesmokesin2007)=1 P(noonesmokes)
=1 10 0 0.085 1
=0.589

0.085

P(atleastonesmokesin2001)=1 P(noonesmokes)
=1 10 0 0.176 1
=0.856

0.176

P(atleastonesmokesin1997)=1 P(noonesmokes)
=1 1 0.23
=0.9267
Thetrendintherecentyearssuggestthatthepercentageofthestudents
smokingcigarettesisdecliningandthatthismightbeduetotheresultof
eithertheincreaseintheawarenesssetrelatedtotheharmfuleffectsof
cigarettesinyouthorduetotheeffectofthepoliciesundertakenbythe
thengovernor oftheNEWYORKCITY,tocurbthemenacethatsmokingis.

Case 5.3 Vehicle Crash

Accidents1000 peryear
999callsathelpline
Officialvehiclesinvolved

Problems

Question1:Expectednumberoftrafficaccidentsperday
involvingvehiclesonoperationalduties

Question2:Probabilitydistributiontablefor(0,1,2,3.10)
trafficaccidentsperday

Solutions
No.ofaccidentsinayear=1000
No.ofaccidentsinaday=2.7397=

P(X=0)
P(X=1)
P(X=2)
P(X=3)
P(X=4)
P(X=5)
P(X=6)
P(X=7)
P(X=8)
P(X=9)
P(X=10)

2.739726027
0.06458804
0.176953534
0.242402101
0.221371782
0.151624508
0.083081922
0.037936951
0.014848122
0.005084973
0.001547937
0.000424092

0
1
2
3
4
5
6
7
8
9
10

VehicleCrash
0.3
0.25
0.2
0.15
0.1
0.05
0
P(X=0) P(X=1) P(X=2) P(X=3) P(X=4) P(X=5) P(X=6) P(X=7) P(X=8) P(X=9) P(X=10)

THANKYOU