162. Company XYZ provides a warranty on a product that it produces. Each year, the number
of warranty claims follows a Poisson distribution with mean c. The probability that no
warranty claims are received in any given year is 0.60.
Company XYZ purchases an insurance policy that will reduce its overall warranty claim
payment costs. The insurance policy will pay nothing for the first warranty claim
received and 5000 for each claim thereafter until the end of the year.
Calculate the expected amount of annual insurance policy payments to Company XYZ.
(A) 554
(B) 872
(C) 1022
(D) 1354
(E) 1612
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