Question

. The average life of a certain type of small motor is 10 years with a standard deviation of 2 years. The manufacturer replaces free all motors that fail while under guarantee. If she is willing to replace 3% of the motors that fail, how long a guarantee (in years) should she offer

Answer 1

She should offer a guarantee of 13.76 years.

Explanation:

Normal Probability Distribution:

Problems of normal distributions can be solved using the z-score formula.

In a set with mean
`\mu` and standard deviation
`\sigma`, the zscore of a measure X is given by:

`Z = (X - \mu)/(\sigma)`

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the pvalue, we get the probability that the value of the measure is greater than X.

The average life of a certain type of small motor is 10 years with a standard deviation of 2 years.

This means that
`\mu = 10, \sigma = 2`

If she is willing to replace 3% of the motors that fail, how long a guarantee (in years) should she offer?

She should offer the 100 - 3 = 97th percentile as a guarantee, so X when Z has a pvalue of 0.97, that is, X when Z = 1.88.

`Z = (X - \mu)/(\sigma)`

`1.88 = (X - 10)/(2)`

`X - 10 = 2*1.88`

`X = 13.76`

She should offer a guarantee of 13.76 years.