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The Output of Simulation Provides an Excellent Basis for Decision

question 85

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The output of simulation provides an excellent basis for decision making since it allows the decision maker to view a continuum of risk-return trade-offs rather than a single-point estimate.


Definitions:

Nominal Rate

The stated interest rate on a loan or financial instrument, not adjusted for inflation.

Inflation

A general increase in prices and fall in the purchasing value of money.

Present Value

The valuation of an expected income stream determined by discounting the future income to the present using a discount rate.

Income Stream

A regular flow of money from an investment, property, or other financial assets.

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