Explain How Monte Carlo Simulation Uses Random Numbers

question 23

Essay

Explain how Monte Carlo simulation uses random numbers.

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Definitions:

Resource

In finance, a resource refers to any financial asset or input that can contribute to a firm's ability to create goods, services, or further financial gains.

Annuity

A financial instrument that provides a consistent series of payments to a person, often employed as a component of a retirement plan.

Equal Payments

Regular payments of the same amount over a specified period, often associated with loans or mortgages.

Time Intervals

Defined periods or durations that are used for scheduling, analysis, or measurement purposes within various contexts, such as financial planning or project management.