Q1. Which of the following statements about Monte Carlo simulation is TRUE? Monte Carlo simulation:

A)   forecasts a more accurate risk/return tradeoff than a deterministic approach.

B)   typically produces approximately 100 trials.

C)   is best when it uses only historical data.

Q2. Which of the following statements about approaches in retirement planning is FALSE?

A)   Monte Carlo techniques can be used by most individual investors.

B)   Monte Carlo techniques take into account probabilities for input variables.

C)   Deterministic planning techniques use multiple values for economic and financial variables.

Q3. Which of the following inputs is NOT used in both deterministic and probabilistic analyses in individual retirement planning?

A)   Input variable probabilities.

B)   Current income.

C)   Assets owned.

答案和详解如下：

Q1. Which of the following statements about Monte Carlo simulation is TRUE? Monte Carlo simulation:

A)   forecasts a more accurate risk/return tradeoff than a deterministic approach.

B)   typically produces approximately 100 trials.

C)   is best when it uses only historical data.

Correct answer is A)

History provides a view of only one possible path among the many that might occur in the future. It is difficult to estimate expected returns using historical figures because of the volatility factor. Monte Carlo analysis produces probability distribution by tabulating the outcomes of a large number (often 10,000) of simulated trials.

Q2. Which of the following statements about approaches in retirement planning is FALSE?

A)   Monte Carlo techniques can be used by most individual investors.

B)   Monte Carlo techniques take into account probabilities for input variables.

C)   Deterministic planning techniques use multiple values for economic and financial variables.

Correct answer is C)

Deterministic planning techniques use single values for economic and financial variables. Monte Carlo (MC) simulations generate a probabilistic forecast of retirement period values. Although MC analyses require computing powers, the advent of computers available at low cost provides the individual investor a means for incorporating probabilities into retirement planning process.

Q3. Which of the following inputs is NOT used in both deterministic and probabilistic analyses in individual retirement planning?

A)   Input variable probabilities.

B)   Current income.

C)   Assets owned.

Correct answer is A)

In both approaches, the individual supplies a similar set of personal information, including the above as well as age, savings, etc. The difference between deterministic and probabilistic analyses is that deterministic planning techniques use single values for economic and financial variables. Monte Carlo (MC) simulations generate a probabilistic forecast of multiple retirement period values. Only Monte Carlo simulation would require the input of variable probabilities.