# monte carlo

## Project Description:

a decision maker is working on a problem that requires her to study the uncertainty surrounding the payoff of an investment. there are three possible levels of payoff -\$1,000, \$5,000, and \$10,000. as a rough approximation, the decision maker believes that each possible payoff is equally likely. but she is not fully comfortable with the assessment that each probability is exactly 1/3, and so would like to conduct a sensitivity analysis. in fact, she believes that each probability could range from 0 to ½.

1. show how a monte carlo simulation could facilitate a sensitivity analysis of the probabilities of the payoff

2. suppose the decision maker is willing to say that each of the three probabilities could be chosen from a uniform distribution between 0 and 1. could you incorporate this information into your simulation? if so, how? if not, explain why not, or what additional information you would need.
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Price Type: Negotiable

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