An Introduction to Mathematical Statistics and Its Applications (6th Edition)

Published by Pearson
ISBN 10: 0-13411-421-3
ISBN 13: 978-0-13411-421-7

Chapter 3 Random Variables - 3.6 The Variance - Questions - Page 158: 14

Answer

$\color{blue}{\$17.6}$

Work Step by Step

Let $Y$ denote initial the charge for repairing an automobile. From the given, $\mu_Y = \$200$ and $\text{Var}(Y) = \sigma_Y^2 = (\$16)^2$. With a $10\%$ tax and an additional $\$15$ flat fee, the total charge would be $Y+ 10\%Y + \$15$ = $1.1Y + \$15$. Using Theorem 3.6.2, the variance of the total charge would then be $\begin{align*} \text{Var}(1.1Y + \$15) &= (1.1)^2\text{Var}(Y) \qquad [\ \text{Theorem 3.6.2}\ ] \\ &= (1.1)^2(\$16)^2 \\ \sqrt{\text{Var}(1.1Y + \$15)} &= (1.1)(\$16) \\ \color{blue}{\sigma_{1.1Y + \$15}}\ &\color{blue}{= \$17.6} \end{align*}$
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