Faithfully modelled as exponential random

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Suppose that you own a store that sells a particular stove. You purchase the stoves from the distributor for $650 each. You believe that this stove has a lifetime which can be faithfully modelled as an exponential random variable with mean 10 years. You would like to offer the following extended warranty on this stove: if the stove breaks within r years, you will replace the stove completely (at a cost of $650 to you). If the stove lasts longer than r years, the extended warranty pays nothing. Let $C be the cost you will charge the consumer for this extended warranty. If the expected profit you get from this warranty is zero and r=3, then C= If the expected profit you get from this warranty is zero and C=200, then r=

Reference no: EM131041419

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