Simulate Amanda's Portfolio Over the Next 30 Years and Determine

question 9

Essay

Simulate Amanda's portfolio over the next 30 years and determine how much she can expect to have in her account at the end of that period.At the beginning of each year,compute the beginning balance in Amanda's account.Note that this balance is either 0 (for year 1)or equal to the ending balance of the previous year.The contribution of $5,000 is then added to calculate the new balance.The market return for each year is given by a normal random variable with the parameters above (assume the market returns in each year are independent of the other years).The ending balance for each year is then equal to the beginning balance,augmented by the contribution,and multiplied by (1+Market return).
​
Next,suppose Amanda's broker thinks the stock market may be too risky and has advised her to diversity by investing some of her money in money market funds and bonds.He estimates that this will lower her expected annual return to 10% per year,but will also lower the standard deviation to 10%.Suppose again that Amanda will stop investing in the stock market and transfer all of her retirement into a savings account if and when she reaches $500,000.When can she expect to reach this goal under the more conservative investing strategy?

---

Definitions:

New Window

In computing, it refers to the opening of a separate, additional window in a graphical user interface, typically initiated by user action.

Page Break

A marker in text or document formatting that signifies the end of one page and the beginning of the next.

Lock

A security feature or mechanism used to restrict access to data, a device, or software to unauthorized users.

Margins Tab

A feature in document editing software that allows users to adjust the space between text and the edge of the page.