The Difference Between Scenario Analysis and Sensitivity Analysis Is That

question 37

Multiple Choice

The difference between scenario analysis and sensitivity analysis is that

• A)only scenario analysis breaks the net present value (NPV)calculation into its component assumptions.
• B)scenario analysis considers the effect on net present value (NPV)of changing multiple project parameters.
• C)only sensitivity analysis allows us to change our estimated inputs of our net present value (NPV)analysis.
• D)scenario analysis is based upon the internal rate of return (IRR)and sensitivity analysis is based upon net present value (NPV).

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Definitions:

Strip Bonds

Bonds that have had their principal and coupon payments separated, creating individual securities from each interest payment and the principal.

Compound-Interest GIC

A Guaranteed Investment Certificate where the interest earned is compounded at regular intervals, allowing the investment to grow at a faster rate compared to simple interest.

Maturity Value

The amount to be paid to the holder of a financial instrument at the end of its term or at maturity.

Dollar Amount

A numerical monetary value specified in units of currency, specifically the United States dollar.