Create a set of 3,000 simulations of a monthly house price for 10 years using the equation and parameters in 3 above. Assume the starting price is $800,000. Do you think 3,000 simulations is enough? Hints:

a. Since you do not know the appreciation before t=1, warm up the data generating process with 1 years worth of appreciation to generate a random t=0 appreciation (you can start the warmup itself with r=0).

b. You can use either VBA or simulate directly in the spreadsheet. When testing your work, you may want to use fewer Monte Carlo simulations (say 100-300), depending on your hardware.

c. is a normal random draw with mean 0 and variance 1. To generate such a random draw, use the function norm.inv(rand(),0,1). Rand(generates a uniform random number between 0 and 1 (a random probability), and the function then returns a random draw from the normal distribution with mean 0 and variance 1.

d. Since every alteration to your spreadsheet will re-compute the random variable (potentially changing your results slightly), I suggest you switch off the automatic workbook calculation by going to file>options>formulas and selecting manual. To re-compute the workbook, you MUST then press control = or F9 to update formulae... dont forget this. Also, best to set back to automatic when done with project. Apples may be different.