Module 7: Simulation Part 2
October 5, 2020
Review:
- Module 6
Presentation:
- Video Lecture
- Random Variables
- Discrete Random Variables
- Probability distribution table
- Dice Simulation
- Continuous Random Variables
- Stock Market simulation next week
- Discrete Random Variables
Assignment:
- Stock Market Simulation in Sheets
- Use Annual Stock Market Return data as a starting point
- Modifications Part 1
- Generate a 40-year simulation (instead of 30)
- Modify the simulation to add $1,000 to the balance each year
- Make a histogram of your ending balances
- Modifications Part 2
- Add a “fixed income” (bonds) component to your simulation
- Assumptions
- bond market returns are normally distributed
- mean = 7.88%
- standard deviation = 6.86%
- Assumptions
- Your “portfolio” should be 60% stocks and 40% bonds
- How does the distribution of ending balances change?
- Add a “fixed income” (bonds) component to your simulation
