Question

The process of running thousands of model trials by substituting a range of values from variables' individual probability distributions and then calculating outcomes over and over, each time using a different set of random values from the probability functions, is called:

Group of answer choices

Scenario Analysis

Sensitivity Analysis

NPV Profile Analysis

Monte Carlo Simulation

Answer 1

Monte Carlo simulation will be performing a risk analysis by building models of possible result by substituting a range of values and it is is calculating the outcome over and over and each time it is using a different set of random values from the probability function.

All the other options related to scenario analysis along with sensitivity analysis and net present value profile analysis are false.

Correct answer will be option (D) Monte Carlo simulation.