2. Refer to the Simulation worksheet. This worksheet contains the historical monthly returns of a stock index. We will refer to this stock index as the INDEX100. The worksheet also shows the mean and the standard deviation of the INDEX100 monthly returns in cells C4 and C5, respectively.

Let the initial value of the INDEX100 be 5,428.00.

(a) [12 marks] Use the Monte Carlo method to simulate 1000 values of the INDEX100 after 12 months. You must provide formulas in the cells of the array E9:Q1008. Otherwise, you will receive no credit for this part.

Prop. (Ending value > 8000) Mean Stdev. 0.55% 0.0395 Starting INDEX100 value 5,428.00 10 11 12 Ending INDEX100 value Month INDEX100 Simulation round 1 2 3 4 5 6 7 8 00 9 1 -0.50% 2 2 3 3 4 3.60% 5.00% 9.45% -2.90% 3.70% 4 5 5 NM + 0 0 6 6 7 7 1.90% 2.50% 8 8 9 10 9 10 11 11 -4.10% -1.10% 3.80% -4.50% -2.10% 0.78% 12 12 13 13 14 14 4 15 0.40% 15 16 4.14% 16 Prop. (Ending value > 8000) Mean Stdev. 0.55% 0.0395 Starting INDEX100 value 5,428.00 10 11 12 Ending INDEX100 value Month INDEX100 Simulation round 1 2 3 4 5 6 7 8 00 9 1 -0.50% 2 2 3 3 4 3.60% 5.00% 9.45% -2.90% 3.70% 4 5 5 NM + 0 0 6 6 7 7 1.90% 2.50% 8 8 9 10 9 10 11 11 -4.10% -1.10% 3.80% -4.50% -2.10% 0.78% 12 12 13 13 14 14 4 15 0.40% 15 16 4.14% 16