This option simulates the Markov Process using Monte-Carlo simulation. The Start button allows entry of the initial state. The simulation proceeds with sets of 20 transitions. Both time for the transition and the new state are simulated using the random numbers obtained from the Excel internal random number generator. The More button provides additional sets of 20 transitions. The Chart buttons construct graphs of the various quantities. The simulation illustrates the dynamic nature of the stochastic process.

Simulation data is collected and displayed on this worksheet with the tables illustrated below. The Cost Rate and Present Worth statistics are obtained from the last line of the simulation. The state frequency shows the proportion of the steps that have the system in the several states of the system. The time frequency shows the proportion of time that the system spends in the states. These proportions are generally not equal because different states have different average residence times.