Page 40 Running a scenario, or executing the model, performs the following steps: –A retirement cost is sampled from the range of possible values –The 5% bond risk premium is applied to the retirement cost sampled –An inflation rate is sampled from the range of possible values –The retirement cost is carried-forward (escalated) to a future value, based on the sampled inflation rate –The retirement cost is then discounted back to a present value based on the fixed credit adjusted risk-free rate –The result of the run is stored in the @Risk software –The above steps are performed 4,999 additional times –All 5,000 results are combined to produce a range of possible outcomes, along with confidence levels, for the given scenario ARO Modeling Methodology
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