What Is Monte Carlo Simulation

question 16

Multiple Choice

What is Monte Carlo simulation?

• A)It is the process of generating random values for uncertain inputs in a model,computing the output variables of interest,and repeating this process for many trials in order to understand the distribution of the output results.
• B)It is a measure of the correlation between two variables X and Y that falls exclusively between the values +1 and -1.
• C)It is a ratio of the departure of an estimated parameter from its notional value and its standard error.
• D)It is an approach for developing a comprehensive understanding and awareness of the risk associated with a particular variable of interest.

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Definitions:

Notes Payable

Liabilities represented by written promises to pay specific sums of money at future dates, typically evidenced by formal instruments of credit.

Accounts Payable

Liabilities to creditors for goods or services purchased on credit, representing obligations that a company needs to pay off in the near term.

Interest Expense

The cost incurred by an entity for borrowed funds, recognized as an expense in the income statement over the period the funds are borrowed.

Unearned Revenue

Money received by a company for services or products which have not yet been delivered or performed.