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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamentals of Research

Which statement about sensitivity analysis in a research model is correct?

Sensitivity analysis changes one input variable at a time while holding the others constant to see how the output, such as EPS or target value, responds. Scenario analysis, by contrast, changes several assumptions together and may assign probabilities to each scenario.

  1. AIt changes one input variable at a time to see the effect on the outputCorrect
  2. BIt assigns probabilities to several complete sets of assumptions
  3. CIt guarantees that the forecast will be accurate
  4. DIt is used only for historical data, not forecasts

Explanation

Sensitivity analysis varies one key assumption at a time, holding others constant, to see how much the output such as EPS or value changes. Assigning probabilities to combined assumption sets describes scenario analysis. It does not guarantee accuracy and is used for forecasts.

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