Monte Carlo simulation in MS Excel We can evaluate possible scenarios in MS Excel using the help of simulation. To understand this we need to understand what is simulation & how can this be implemented in Excel. If we want to model a process, a process is typically represented as: Y = f(x1, x2…) Now in a simulation exercise, we try to estimate the ranges of the input variables and vary the input variables in this range for a sufficient number of iterations and then try to understand the distribution of the output Y. For example if we try to calculate the corpus accumulated during a period of 20 years wherein the investment amount varies between 1000 to 3500 per month and the growth expected in the corpus lies between -5% and 12%. We use the Excel formula RANDBETWEEN(1000,3500) to generate random investment amount per month and then multiply by 12 to calculate yearly investments. The interest rate per year is also generated using RANDBETWEEN(-5,12)...
