A Pharmaceutical Company Wishes to Test a New Drug with the Expectation

question 18

Essay

A pharmaceutical company wishes to test a new drug with the expectation of lowering cholesterol levels. Tensubjects are randomly selected and pretested. The results are listed below. The subjects were placed on thedrug for a period of 6 months, after which their cholesterol levels were tested again. The results are listedbelow. (All units are milligrams per deciliter.) Test the companyʹs claim that the drug lowers cholesterol levels.Use α = 0.01. Assume that the distribution is normally distributed. $$\begin{array} { l | c | c | c | c | c | c | c | c | c | c | } \text { Subject } & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \\\hline \text { Before } & 195 & 225 & 202 & 195 & 175 & 250 & 235 & 268 & 190 & 240 \\\hline \text { After } & 180 & 220 & 210 & 175 & 170 & 250 & 205 & 250 & 190 & 225\end{array}$$

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Definitions:

Conversion Price

The predetermined price per share at which a convertible bond or preferred stock can be converted into common stock.

Current Price

The market value of a stock, bond, or commodity at which it can be bought or sold at a particular time.

Conversion Ratio

The number of shares an investor gets for converting a convertible security into common stock.

Conversion Premium

The additional cost over the current market value to convert a convertible security into the underlying stock.