Suppose you retire with $1million at age of 65. You plan to invest your retirement into a mixture of a riky fund and a fixed income fund, where the return of the risky fund follows a normal distribution. You plans to withdraw $150,000 at the end of every year from this accout. To prevent overwithdrawal at the end, you put a safety cushion of 3 If balance of the retirement fund at the end of year, before annual withdrawal is less than 3 times the planned annual withdrawal amount, you withdraw one-third of the remaining balance. (Hint: use IF function) You want to find out how much you are left at the age of 75. Simulate one time to find out the remaining balance at the age of 17 ( 10 years later) Simulate 100 times, find out average, standard deviation, along with probabilty of the remaining fund is positive.
Suppose you retire with $1million at age of 65. You plan to invest your retirement into a mixture of a riky fund and a fixed income fund, where the return of the risky fund follows a normal distribution. You plans to withdraw $150,000 at the end of every year from this accout. To prevent overwithdrawal at the end, you put a safety cushion of 3 If balance of the retirement fund at the end of year, before annual withdrawal is less than 3 times the planned annual withdrawal amount, you withdraw one-third of the remaining balance. (Hint: use IF function) You want to find out how much you are left at the age of 75. Simulate one time to find out the remaining balance at the age of 17 ( 10 years later) Simulate 100 times, find out average, standard deviation, along with probabilty of the remaining fund is positive.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Suppose you retire with $1million at age of 65.
You plan to invest your retirement into a mixture of a riky fund and a fixed income fund, where the return of the risky fund follows a
You plans to withdraw $150,000 at the end of every year from this accout.
To prevent overwithdrawal at the end, you put a safety cushion of 3
If balance of the retirement fund at the end of year, before annual withdrawal is less than 3 times the planned annual withdrawal amount, you withdraw one-third of the remaining balance. (Hint: use IF function)
You want to find out how much you are left at the age of 75.
- Simulate one time to find out the remaining balance at the age of 17 ( 10 years later)
- Simulate 100 times, find out average, standard deviation, along with probabilty of the remaining fund is positive.
Transcribed Image Text:Current wealth ($)
Risk-free rate
Parameters of risky investment
Expected annual return
Standard deviation of return
Proportion invested in risky
Safety cushion
Annual withdrawal
Year
1
1,000,000
Suppose you retire with $1million at age of 65
You plan to invest your retirement into a mixtu
the return of the risky fund follows a normal c
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New button.
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You plans to withdraw $150,000 at the end of
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In a future update, Snipping Tool will be moving
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like usual with Snip & Sketch (or try the shortcut
Windows logo key + Shift + S).
To prevent overwithdrawal at the end, you pu
If balance of the retirement fund at the end of
the planned annual withdrawal amount, you w
use IF function)
20%
70%
Try Snip & Sketch
3
PICTI
you you
You want to find out how much you are left at
1. Simulate one time to find out the remaining
2. Simulate 100 times, find out average, standard deviation, along with probabilty of the
remaining fund is positive.
150,000
Balance end
Balance
beginning
Invested in Invested in
risky bonds
Ret. on risky fund
of year bf withdrawal
withdrawal
Left at end
of 10 years
of year
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