Q1. When planning for retirement, an individual investor may wish to use a Monte Carlo approach over a deterministic approach because:

A)   Monte Carlo approaches are simpler and quicker to implement.

B)   Monte Carlo approaches provide a better analysis of outcome ranges than the single wealth figure estimate generated by deterministic approaches.

C)   deterministic approaches use inappropriate inputs.

Q2. Deterministic approaches differ from Monte Carlo approaches in that deterministic approaches:

A)   use probability forecasts whereas Monte Carlo approaches use best estimates.

B)   generate single numbers whereas Monte Carlo approaches generate a range of outcomes.

C)   generate ranges of outcomes whereas Monte Carlo approaches generate single numbers.

Q3. Probabilistic outcomes generated by a Monte Carlo approach to retirement planning do NOT generate which of the following?

A)   Higher probabilities of meeting high return expectations.

B)   Potential risk/return tradeoffs.

C)   Better incorporation of tax implications.

答案和详解如下：

Q1. When planning for retirement, an individual investor may wish to use a Monte Carlo approach over a deterministic approach because:

A)   Monte Carlo approaches are simpler and quicker to implement.

B)   Monte Carlo approaches provide a better analysis of outcome ranges than the single wealth figure estimate generated by deterministic approaches.

C)   deterministic approaches use inappropriate inputs.

Correct answer is B)         

Monte Carlo approaches generate ranges of outcomes that can be associated with probabilities of their occurrences. Although slightly more involved in implementation, and sometimes taking longer to generate, Monte Carlo generated ranges and or probabilities may better indicate to the client realistic retirement opportunities.

Q2. Deterministic approaches differ from Monte Carlo approaches in that deterministic approaches:

A)   use probability forecasts whereas Monte Carlo approaches use best estimates.

B)   generate single numbers whereas Monte Carlo approaches generate a range of outcomes.

C)   generate ranges of outcomes whereas Monte Carlo approaches generate single numbers.

Correct answer is B)

Monte Carlo approaches rely on probabilistic inputs to generate a range of outcomes that may provide better information than any method that generates a single number, like deterministic approaches.

Q3. Probabilistic outcomes generated by a Monte Carlo approach to retirement planning do NOT generate which of the following?

A)   Higher probabilities of meeting high return expectations.

B)   Potential risk/return tradeoffs.

C)   Better incorporation of tax implications.

Correct answer is A)

No forecasting method can affect probabilities of meeting high return expectations. Forecasting methods can only indicate future outcomes, and in the case of Monte Carlo approaches, potential risk/return tradeoffs can be generated, as well as better incorporating tax implications.