Which of the following is a disadvantage associated with using Monte Carlo simulation?
A)Overly precise calculations
B)People prefer one clear figure to probabilities
C)Effectively represents a "guesstimated" risk- adjusted approach
D)Assumes that the key factors are correlated with each other
E)All of the above are disadvantages

Question

Quizplus · Accepted Answer

People generally prefer one clear figure rather than probabilities. Therefore, presenting the results in probabilistic terms may not be well received by all stakeholders. The other options listed are not disadvantages but rather features of Monte Carlo simulation. Option A is incorrect because Monte Carlo simulation provides estimates with a level of precision that can be modified by changing the number of iterations. Option C is incorrect because Monte Carlo simulation provides a robust risk assessment methodology that is better than guesswork. Option D is incorrect because Monte Carlo simulation can handle correlations among variables.

Which of the Following Is a Disadvantage Associated with Using