Reference no: EM131106738
The simulation output from Example indicates that an investment heavy in stocks produces the best results. Would it be better to invest entirely in stocks? Answer this by rerunning the simulation. Is there any apparent downside to this strategy?
Example
Attorney Sally Evans has just begun her career. At age 25, she has 40 years until retirement, but she realizes that now is the time to start investing. She plans to invest $1000 at the beginning of each of the next 40 years. Each year, she plans to put fixed percentages-the same each year-of this $1000 into stocks, Treasury bonds (T-bonds), and Treasury bills (T-bills). However, she is not sure which percentages to use. (We call these percentages investment weights.) She does have historical annual returns from stocks, T-bonds, and T-bills from 1946 to 2007. These are listed in the file Retirement Planning.xlsx. This file also includes inflation rates for these years. For example, for 1993 the annual returns for stocks, T-bonds, and T-bills were 9.99%, 18.24%, and 2.90%, respectively, and the inflation rate was 2.75%. Sally would like to use simulation to help decide what investment weights to use, with the objective of achieving a large investment value, in today's dollars, at the end of 40 years.
Objective To use simulation to estimate the value of Sally's future investments, in today's dollars, from several investment strategies in T-bills, T-bonds, and stocks.
|
Do you think that more single fathers would be willing
: Search in your community (Vancouver, Washington) to find resources available to young fathers. Using the Journal, list the resources you found. If there were more services to address the needs of single fathers, do you think that more single fathe..
|
|
Forecasted balance sheets for textile industries number
: Blackrock Investments is looking to buy Textile Industries, with the actual purchase occurring on December 31, 2011. Blackrock has created forecasted balance sheets and income statements for Textile Industries following the acquisition which reflect ..
|
|
Outline an experiment for validating the chigirev-bialek
: Using the idea of the Grassberger-Procacia correlation dimension described in Section 13.10, outline an experiment for validating the Chigirev-Bialek algorithm as a possible estimator of manifold-dimensional complexity
|
|
What is the 90-day forward rate
: Assume that interest rate parity holds and that 90-day risk-free securities yield 5% in the United States and 5.3% in Britain. In the spot market, 1 pound = $2. a. Is the 90-day forward rate trading at a premium or a discount relative to the spot rat..
|
|
An investment heavy in stocks produces the best results
: The simulation output from Example 11.7 indicates that an investment heavy in stocks produces the best results. Would it be better to invest entirely in stocks? Answer this by rerunning the simulation. Is there any apparent downside to this strat..
|
|
Determine the current balance of retained earnings
: The following information has been taken from the ledger accounts of Sampras Corporation. Determine the current balance of retained earnings.
|
|
Explore the internet and find a free or low-cost tool
: Animations are a form of video that rely on moving graphics (e.g., cartoons). Although animations often appeal to children, adults can appreciate animations that rely on humor or adult characters to convey information. Explore the Internet and fin..
|
|
What should be the price of the same disc in mexico
: In the spot market, 10.5 Mexican pesos can be exchanged for 1 U.S. dollar. A compact disc costs $15 in the United States. If purchasing power parity (PPP) holds, what should be the price of the same disc in Mexico?
|
|
Calculate activity-based unit cost of the smart phone case
: Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach for setting its budget. Calculate the activity-based unit cost of the smart phon..
|