An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate-term fund, and a mean of 6.2% and standard deviation of 5% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. multiple choice On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. On average, the investment strategy in part a is more risky but yields a higher return.
An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate-term fund, and a mean of 6.2% and standard deviation of 5% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. multiple choice On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. On average, the investment strategy in part a is more risky but yields a higher return.
An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate-term fund, and a mean of 6.2% and standard deviation of 5% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. multiple choice On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. On average, the investment strategy in part a is more risky but yields a higher return.
An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate-term fund, and a mean of 6.2% and standard deviation of 5% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund.
Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year.
Note: Round the final answer to two decimal places.
If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year.
Note: Round the final answer to two decimal places.
Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices.
multiple choice
On average, the investment strategy in part a is more risky and yields a lower return.
On average, the investment strategy in part a is less risky and yields a higher return.
On average, the investment strategy in part a is less risky but yields a lower return.
On average, the investment strategy in part a is more risky but yields a higher return.
Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.
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