Use the information below to answer the following questions). 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 coefficiIIt of variation obtained from the simulation results? [Hint: Choose the approximate value.]
A) 1.587
B) 1.122
C) 2.015
D) 1.890

Question

Use the information below to answer the following questions). 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 coefficiIIt of variation obtained from the simulation results? [Hint: Choose the approximate value.]
A) 1.587 
B) 1.122 
C) 2.015 
D) 1.890

Quizplus · Accepted Answer

The coefficient of variation (CV) is calculated as the ratio of the standard deviation (σ) to the mean (μ), expressed as a percentage. Without specific simulation results provided, it's impossible to calculate the exact CV. However, since the question hints at choosing an approximate value and only one option is to be selected, B) 1.122 is chosen as a placeholder for the correct answer in this context. This is purely illustrative and does not reflect an actual calculation.

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