Use the Information Below to Answer the Following Question(s)

question 37

Multiple Choice

Use the information below to answer the following question(s) .
Below is a decision tree illustrating the R&D process for a new drug.

Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.

-What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]

• A)$ 119.0
• B)$ 116.1
• C)$ 105.7
• D)$ 94.4

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Definitions:

Compound Interest

This is the calculation of interest on a deposit or loan that takes into account both the initial principal and the compounded interest from past periods.

Bonds Payable

Long-term liabilities representing money a company owes to holders of its bond issues, often with fixed interest payments.

Long-Term Lease Liabilities

Financial obligations resulting from leasing contracts that extend beyond one year, recorded on the balance sheet under liabilities.

Compound Interest

A method where interest is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.