Stephanie Watson Is 23 Years Old and Has Accumulated $4,000

question 27

Multiple Choice

Stephanie Watson is 23 years old and has accumulated $4,000 in her self-directed defined contribution pension plan.Each year she contributes $2,000 to the plan, and her employer contributes an equal amount.Stephanie thinks she will retire at age 67 and figures she will live to age 81.The plan allows for two types of investments.One offers a 3.5% risk-free real rate of return.The other offers an expected return of 10% and has a standard deviation of 23%.Stephanie now has 5% of her money in the risk-free investment and 95% in the risky investment.She plans to continue saving at the same rate and keep the same proportions invested in each of the investments.Her salary will grow at the same rate as inflation. How much does Stephanie currently have in the safe account; how much in the risky account?

• A)$3,800; $200
• B)$2,000; $2,000
• C)$200; $3,800
• D)$2,500; $1,500

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Definitions:

Hypothetical Proposition

A statement in logic that suggests a conditional relationship between two propositions, where one is the consequence of the other.

Disjunctive Proposition

A logical statement that proposes an either/or scenario, where only one of the conditions needs to be true.

Categorical Proposition

A statement that affirms or denies something unconditionally, often structured in standardized forms.

Placenta

An organ that develops in the uterus during pregnancy, providing oxygen and nutrients to the growing fetus while removing waste products.