Question

4. A company is deciding whether to fund research trials that, if successful, will earn the company some estimated profit. Suppose that each trial costs $50,000 and has a 20% success rate.

a. The company will keep funding the trials until it reaches the first success. What is the company’s expected cost and what is the standard deviation? (6 points)

b. What’s the probability that it will take three trials to reach the first success? (3 points)

Answer #1

4. A company is deciding whether to fund research trials that,
if successful, will earn the company some estimated profit. Suppose
that each trial costs $50,000 and has a 20% success rate.
a. The company will keep funding the trials until it reaches the
first success. What is the company’s expected cost and what is the
standard deviation? (6 points)
b. What’s the probability that it will take three trials to
reach the first success? (3 points)

A company is deciding whether to fund research trials that, if
successful, will earn the company some estimated profit. Suppose
that each trial costs $50,000 and has a 20% success rate.
The company will keep funding the trials until it reaches the
first success. What is the company’s expected cost and what is the
standard deviation? (6 points)
What’s the probability that it will take three trials to reach
the first success? (3 points)

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