Genny Webb Is 27 Years Old and Has Accumulated $7,500

question 21

Multiple Choice

Genny Webb is 27 years old and has accumulated $7,500 in her self directed defined contribution pension plan. Each year she contributes $2,000 to the plan, and her employer contributes an equal amount. Genny thinks she will retire at age 63 and figures she will live to age 90. The plan allows for two types of investments. One offers a 3% risk free real rate of return. The other offers an expected return of 12% and has a standard deviation of 39%. Genny now has 20% of her money in the risk free investment and 80% 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 Genny currently have in the safe account; how much in the risky account?

• A) $1,500; $6,000
• B) $3,000; $4,500
• C) $2,000; $5,500
• D) $4,800; $2,700
• E) $3,500; $3,500

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Definitions:

Right Skewed

Describes a distribution of data where the tail on the right side of the distribution is longer or fatter than the left side, indicating a majority of the data is concentrated on the left.

Sampling Distribution

The probability distribution of a statistic based on repeated sampling from the same population, used to understand the statistic's properties.

Confidence Interval

A range of values, derived from sample data, that is likely to contain the value of an unknown population parameter, with a given degree of certainty.

Sample Size

The number of observations or replicates included in a statistical sample.