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

question 3

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 market is large, payoff is lognormally distributed with a mean of $4,900 million and a standard deviation of $1,000 million; if market is medium, payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if market is small, payoff is normally distributed with a mean of $1,800 million and standard deviation of
$200 million. Let us also assume that the cost of clinical trials is uncertain and estimates are modeled with a triangular distribution with a minimum of -$700 million, a most likely value of - $550 million, and a maximum of -$500 million. Use 10,000 trials and a random seed of 1.
-What is the probability that the drug will not reach the market? [Hint: Choose the approximate value.]

• A) 0.95
• B) 0.89
• C) 0.77
• D) 0.82

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Definitions:

Sensorineural Hearing Loss

A type of hearing loss resulting from damage to the inner ear (cochlea) or to the nerve pathways from the inner ear to the brain.

Conduction Hearing Loss

Occurs when there is a problem conducting sound waves anywhere along the route through the outer ear, tympanic membrane (eardrum), or middle ear, leading to a reduction in hearing.

Dissociation

A psychological process involving a disconnection between thoughts, identity, consciousness, and memory.

Loss of Balance

A disturbance that causes individuals to feel unsteady, dizzy or have a difficulty in maintaining the body's natural equilibrium.