On Average, a Certain Kind of Kitchen Appliance Requires Repairs

question 18

Multiple Choice

On average, a certain kind of kitchen appliance requires repairs once every four years. Assume that the times between repairs are exponentially distributed. What is the probability that the appliance will work no more than three years without requiring repairs?

• A) 0.3254
• B) 0.6744
• C) 0.5276
• D) 0.4724

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Definitions:

Proprietary Wealth

Wealth that is owned and controlled by an individual or a company, often in the context of investments or intellectual property.

Market Rate of Return

The average rate of return expected by investors from a market or security index over a specific time period.

CAPM

Stands for the Capital Asset Pricing Model, a model that describes the relationship between the expected return of an asset and its risk.

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price.