Alex Goh Is 39 Years Old and Has Accumulated $128,000

question 46

Multiple Choice

Alex Goh is 39 years old and has accumulated $128,000 in his self directed defined contribution pension plan. Each year he contributes $2,500 to the plan, and his employer contributes an equal amount. Alex thinks he will retire at age 62 and figures he will live to age 86. 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 11% and has a standard deviation of 37%. Alex now has 25% of his money in the risk free investment and 75% 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. Of the total amount of new funds that will be invested by Alex and by his employer on his behalf, how much will Alex put into the safe account each year; how much into the risky account?

• A) $2,500; $2,500
• B) $3,200; $1,800
• C) $3,000; $2,000
• D) $1,250; $3,750
• E) $2,400; $2,600

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Definitions:

Regulatory Compliance

The state of being in accordance with established laws, regulations, standards, and specifications relevant to an organization's operations.

Explicit and Implicit Coercion

Directly or indirectly forcing someone to act in a certain way by using threats or manipulation rather than open persuasion.

Facilitation and Support

Refers to the process of making something easier or more achievable, often involving assistance or guidance.

Manipulation and Co-optation

Techniques used in organizational change management where manipulation involves unobtrusively steering people towards desired behaviors, while co-optation involves winning over or neutralizing opposition by incorporating key individuals into the change process.