Alex Moore Is 43 Years Old and Has Accumulated $78,000

question 75

Multiple Choice

Alex Moore is 43 years old and has accumulated $78,000 in his self-directed defined contribution pension plan. Each year he contributes $1,500 to the plan, and his employer contributes an equal amount. Alex thinks he will retire at age 60 and figures he will live to age 83. The plan allows for two types of investments. One offers a 4% risk-free real rate of return. The other offers an expected return of 10% and has a standard deviation of 34%. Alex now has 40% of his money in the risk-free investment and 60% in the risky investment. He plans to continue saving at the same rate and keep the same proportions invested in each of the investments. His salary will grow at the same rate as inflation. How much can Alex expect to have in his risky account at retirement?

• A) $158,982
• B) $309,530
• C) $543,781
• D) $224,651
• E) $345,886

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Definitions:

Cochlea

is a spiral-shaped, fluid-filled inner ear structure responsible for converting sound vibrations into nerve impulses that are interpreted by the brain.

Vestibule

An entryway or chamber that can be the central part of the ear, or an area at the mouth's entrance.

Semicircular Canals

Three looping fluid-filled tunnels in the inner ear that are involved in maintaining balance and sensing head rotation.

Cochlea

A spiral-shaped cavity in the inner ear that plays a key role in the sense of hearing by converting sound vibrations into nerve impulses.