Saving for Retirement Assume an investor begins saving for retirement at age 25 and retires at age 65. Each year, she contributes $10,000 to her retirement account. To keep things simple, assume that there are 40 annual contributions that occur on the investor's 25-th, 26-th, ...,64-th birthdays, and that the final retirement wealth is determined on the investor's 65-th birthday. Savings are invested as follows: 50% in a broad stock market index and 50% in T-Bills. Your task is to compute the accumulated real retirement savings at age 65 for different return realizations. As explained below, you will generate returns using a Monte Carlo simulation. On Canvas, you can find an Excel file containing historical net returns on the S&P 500 and 3-month T-bills, as well as the consumer price index (CPI) from 1926 to 2017. The return on the CPI serves as measure of inflation. STEPS: 1. Compute the annual real return on the 50/50 portfolio for each year in the sample. The resulting set of 92 portfolio returns represents the empirical distribution. These are the returns investors historically realized when investing in a 50/50 mix of stocks and T-bills over this time period. A Report the mean and standard deviation of the portfolio returns computed in step one. Saving for Retirement Assume an investor begins saving for retirement at age 25 and retires at age 65. Each year, she contributes $10,000 to her retirement account. To keep things simple, assume that there are 40 annual contributions that occur on the investor's 25-th, 26-th, ...,64-th birthdays, and that the final retirement wealth is determined on the investor's 65-th birthday. Savings are invested as follows: 50% in a broad stock market index and 50% in T-Bills. Your task is to compute the accumulated real retirement savings at age 65 for different return realizations. As explained below, you will generate returns using a Monte Carlo simulation. On Canvas, you can find an Excel file containing historical net returns on the S&P 500 and 3-month T-bills, as well as the consumer price index (CPI) from 1926 to 2017. The return on the CPI serves as measure of inflation. STEPS: 1. Compute the annual real return on the 50/50 portfolio for each year in the sample. The resulting set of 92 portfolio returns represents the empirical distribution. These are the returns investors historically realized when investing in a 50/50 mix of stocks and T-bills over this time period. A Report the mean and standard deviation of the portfolio returns computed in step one
