develop simulation model-compute average amount, Basic Statistics

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Bob Smith recently completed his MBA and accepted a job with a computer company. To ensure that his retirement is comfortable, he intends to invest $3,000 of his salary into a tax shelter retirement fund at the end of each year. Bob is not certain what the rate of return is, but knows that it is normally distributed with a mean of 13% and a standard deviation of 2%. If Bob is 30 years old, how much money should he expect to have when he is 60?

(a)   Develop a computer simulation model to determine how much will be in his retirement fund after 30 years.

(b)   Use a data table to perform 200 runs of the simulation model developed in part (a).

(c)   Compute the average amount the fund will be worth using the results from the 200 runs in the data table.

(d)   Obtain a histogram for the 200 run results. Use at least 7 class intervals.

(e)   Based on the simulation results in the data table, estimate the probability that the fund will be more than $750,000 and the probability that the fund will be more than $1,000,000.

 


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