1. Looking forward to retirement (20 points) Joe recently received his business degree and he is now smartly starting to plan for his retirement. Joe plans to invest $3000 of his salary into a retirement fund at the end of each year. Assume that returns are paid at the end of each year and that they are based on the beginning-of-year balance. Hint: See Unit 1 Homework Exercise #3 to reference setting up a retirement model, then consider how to adapt for Monte Carlo / a. Suppose that Joe is 30 years old and that his returns each year are normally distributed with a mean of 12.5 % and a standard deviation of 2%. Use EXCEL & simulate for 100 replications. What is the probability that Joe will have at least $500,000 at age 60? (Submit copy of Handwritten answer, 5 pts) b. Suppose instead that Joe contributes $3000 annually to his retirement fund for eight years and then terminates these annual contributions. Use EXCEL & simulate for 100 replications. How much money did Joe contribute in total and what is the expected value of how much he what he would accumulate from his contributions by age 60? What is the probability that Joe will have at least $500,000 at age 60? (Submit answer in an Excel file, 5 pts) c. Suppose instead that Joe contributes nothing to his retirement for the first eight years, but after that contributes $3000 annually until age 60. Use EXCEL & simulate for 100 replications. How much money did Joe contribute in total and what is the expected value of how much he what he would accumulate from his contributions by age 60? What is the probability that Joe will have at least $500,000 at age 60? (Submit answer in an Excel file, 5 pts) d. What if any insights did you gain from parts (b) and (c) above? (Submit answer in an Excel file, 5 pts) 1. Looking forward to retirement (20 points) Joe recently received his business degree and he is now smartly starting to plan for his retirement. Joe plans to invest $3000 of his salary into a retirement fund at the end of each year. Assume that returns are paid at the end of each year and that they are based on the beginning-of-year balance. Hint: See Unit 1 Homework Exercise #3 to reference setting up a retirement model, then consider how to adapt for Monte Carlo / a. Suppose that Joe is 30 years old and that his returns each year are normally distributed with a mean of 12.5 % and a standard deviation of 2%. Use EXCEL & simulate for 100 replications. What is the probability that Joe will have at least $500,000 at age 60? (Submit copy of Handwritten answer, 5 pts) b. Suppose instead that Joe contributes $3000 annually to his retirement fund for eight years and then terminates these annual contributions. Use EXCEL & simulate for 100 replications. How much money did Joe contribute in total and what is the expected value of how much he what he would accumulate from his contributions by age 60? What is the probability that Joe will have at least $500,000 at age 60? (Submit answer in an Excel file, 5 pts) c. Suppose instead that Joe contributes nothing to his retirement for the first eight years, but after that contributes $3000 annually until age 60. Use EXCEL & simulate for 100 replications. How much money did Joe contribute in total and what is the expected value of how much he what he would accumulate from his contributions by age 60? What is the probability that Joe will have at least $500,000 at age 60? (Submit answer in an Excel file, 5 pts) d. What if any insights did you gain from parts (b) and (c) above? (Submit answer in an Excel file, 5 pts)
