Lesson 21: Simulation to Compare Retirement Savings Performance by Asset Allocations
Review:
- Loops
- Hacker Statistics Assignment
- Exam 3 on Wed, Apr 17
- Review for Exam 3 on Mon, Apr 15
Presentation:
- Stock market simulation project
- Assumptions
- Stock market returns are normally distributed with mean=11.84 and standard deviation=16.96
- Aggregate bond returns are normally distributed with mean=7.88 and standard deviation=6.86
- Initial investment balance = $10,000
- Length of simulation = years until you reach age 65
- Number of iterations for each simulation = 100
- Produce 4 investment/retirement portfolio simulations
- 100% stocks + 0% bonds
- 80% stocks + 20% bonds
- 60% stocks + 40% bonds
- 40% stocks + 60% bonds
- Comparison of simulation output
- Create histograms to illustrate distribution of resulting ending balances
- Calculate mean and standard deviation of ending balances
- Produce 95% Confidence Intervals to estimate ending balances
- Answer these 3 questions
- Which portfolios produced the highest and lowest ending balances?
- Which portfolios produced the most and least volatility?
- Which investment portfolio would you choose for your retirement? Explain why.
- Deliverable
- Produce a 1-page slide/doc to illustrate and explain results
- Must include a link
- to Repl.it program; or
- to Google Sheets file
- 1 piece of paper only (use front and back)
- Due in class on Wed, Apr 17 (with Exam 3)
- Assumptions
Assignment:
- Complete Hacker Statistics project and all DataCamp assignments
- Work on retirement simulation project
