You are reviewing a simulation model and find that the analyst who prepared the model used the formula = 100 + (175 − 100) × RAND() to generate the simulated selling price of a product. Which of the following assumptions did the analyst make about the selling price of the product?
I. The minimum price of the product is 175.
II. The maximum price of the product is 175.
III. The cost of the product is normally distributed.
A) I only
B) II only
C) III only
D) I and II only
E) I and III only

Question

Quizplus · Accepted Answer

The formula = 100 + (175 − 100) × RAND() suggests that the minimum price is 100 (since 100 is added at the beginning and represents the lowest possible outcome of the formula when RAND() returns 0), and the maximum price is 175 (since 175 is the upper limit in the formula, achieved when RAND() returns 1). There is no assumption about the distribution of the cost, so the assumption about normal distribution (III) is not implied by this formula.

You Are Reviewing a Simulation Model and Find That the Analyst