Monte Carlo Simulation

[Tahir]

Hi
Can any one please explain why log 10 was used to convert wealth level. Question 12, CFA text R 18 Assets allocation,Question page 289-90, answer page 299.
Regards

 

[cpk123]

left hand side the scale is in terms of 10’s.
and log 10 to the base 10 = 1, log 100 to base 10 = 2 and so on.
so 100000 = 5, 1000000 = 6 and you can then determine where 630K would be between the two points.

 

[Galli]

Don’t get too beat up over this question. In real life you wouldn’t be this nerdy using logs to chart wealth over time.

 

[Tahir]

Thanks, How we calculate scale??
Is it 1,000,000/100,000 and than 10,000,000/1000,000 ?? (As in the question)