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

question 27

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.
-How much does Alex currently have in the safe account; how much in the risky account?

• A)$31,200, $46,800
• B)$39,000, $39,000
• C)$32,000, $96,000
• D)$45,300, $32,700
• E)$64,000,$14,000

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Definitions:

One Factor

A term usually associated with experimental design referring to a single variable that is changed or manipulated.

Factorial ANOVA

An ANOVA test used for multiple independent variables, assessing the effect of each and their interactions on the dependent variable.

Research Hypotheses

Propositions that are tested statistically, suggesting a potential outcome or relationship based on theoretical considerations.

Factorial ANOVA

A statistical analysis technique used to identify the effects of two or more independent variables on a dependent variable, while also considering the interaction between these variables.