- CFA Exams
- CFA Exam: Level II 2021
- Study Session 7. Corporate Finance (1)
- Reading 19. Capital Budgeting
- Subject 3. Risk analysis of capital investments - stand-alone methods

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**CFA Practice Question**

Monte Carlo simulation is a tool for considering the:

B. Effect of changing a limited number of plausible combination of variables on the NPV of the project.

C. Effect of changing all possible combinations of variables on the NPV of the project.

A. Effect of changing one variable on the NPV of the project.

B. Effect of changing a limited number of plausible combination of variables on the NPV of the project.

C. Effect of changing all possible combinations of variables on the NPV of the project.

Correct Answer: C

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**User Contributed Comments**
1

User |
Comment |
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sarath |
We can define the set of values that the variables can take and then the computer will pick all the combinations in random and generate the NPV values in each case.. |