Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10 separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a drug is 50%. What is the standard deviation of Big Cure's average net income for their new blockbuster drug?
Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10 separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a drug is 50%. What is the standard deviation of Big Cure's average net income for their new blockbuster drug?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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![Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential
"blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved,
Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10
separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's
drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a
drug is 50%.
What is the standard deviation of Big Cure's average net income for their new blockbuster drug?
$0
$1 billion
$100 million
$500 million](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F98dabfc2-ebb4-4b6c-b967-261113535ee4%2F821159b4-9239-4a5e-b72d-0ed93b969951%2F99l20ng_processed.png&w=3840&q=75)
Transcribed Image Text:Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential
"blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved,
Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10
separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's
drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a
drug is 50%.
What is the standard deviation of Big Cure's average net income for their new blockbuster drug?
$0
$1 billion
$100 million
$500 million
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