How sensitive is the calculation to the rate of return

Reference no: EM13686391

Presume that you have saved $10,000 for retirement and are currently 20 years old. Moreover, suppose that you will earn the historical return of about six percent on your portfolio of stocks. Consider how the balance in your retirement account evolves as you age under different assumptions below. (Using a spreadsheet program like Excel will make the analysis easier.)

1. Plot your retirement account balance by year for these three scenarios on a standard scale.

2. Do the same calculations for rates of return of 4% and 8%. How sensitive is the calculation to the rate of return?

3. Compute the balance in your retirement account when you will be 25, 30, 40, 50, and 65 years old assuming that there are no deposits or withdrawals.

4. Plot the same thing with a ratio scale.

Reference no: EM13686391

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