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(Solved) Return BB 1 61% 2 27% 3 25% 4 -2% 5 -10% 6 12% 7 8% 8 9% 9 -10% 10 -20% 10% 1 2 3 4 5 6 7 8 9 10 -20% -10% 9% 8% 12% -10% -2% 25% 27% 61% 10% 0.06...


Use the case by Tony Jurado that we were working on in class. Complete a series of simulations for Henry Tirements retirement planning. First construct a deterministic model. Next, on a separate Excel tab, construct a Monte Carlo model where the return is a normal distribution. Now add the following features (stochastic unless otherwise noted) to a separate model. You may do this successively or in a single third tab:

Fee

Years before retirement (make this deterministic)

Withdrawal rate

Inflation

Life expectancy

Success tolerance

Optional:

       Tax effects (explain what you are modeling (may be deterministic or stochastic)

       Correlations (may just be an explanation)

Finally, experiment with changing the type of distribution. Note a specific effect of a change in the distribution function on the simulation results and explain why this is an interesting case in the real world.

Return
BB
1
61%
2
27%
3
25%
4
-2%
5
-10%
6
12%
7
8%
8
9%
9
-10%
10
-20%
10%
1
2
3
4
5
6
7
8
9
10 -20%
-10%
9%
8%
12%
-10%
-2%
25%
27%
61%
10% 0.06 Inflation adjusted withdrawal
Withdrawal EB
1,000,000.00
60,000.00 1,513,400.00
1,513,400.00
61,800.00 1,843,532.00
1,843,532.00
63,654.00 2,224,847.50
2,224,847.50
65,563.62 2,116,098.20
2,116,098.20
67,530.53 1,843,710.91
1,843,710.91
69,556.44 1,987,053.00
1,987,053.00
71,643.14 2,068,642.65
2,068,642.65
73,792.43 2,174,386.74
2,174,386.74
76,006.20 1,888,542.48
1,888,542.48
78,286.39 1,448,204.87 1,000,000.00
800,000.00
720,000.00
784,800.00
847,584.00
949,294.08
854,364.67
837,277.38
1,046,596.72
1,329,177.84 - 800,000.00
720,000.00
784,800.00
847,584.00
949,294.08
854,364.67
837,277.38
1,046,596.72
1,329,177.84
2,139,976.32 Inflation Rate 3% Year Return
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20 BB
32.06%
32.40%
7.25%
20.93%
-4.66%
24.19%
20.46%
2.89%
16.54%
-4.24%
43.35%
13.71%
-16.61%
37.37%
15.30%
-4.93%
-6.30%
-13.37%
-22.82%
19.32% 1,000,000
1,188,511
1,434,574.29
1,420,324.41
1,577,624.51
1,388,209.24
1,565,487.00
1,724,391.71
1,629,457.43
1,726,730.68
1,504,910.96
1,923,754.35
1,993,049.60
1,512,253.97
1,818,385.06
1,868,371.98
1,578,685.39
1,274,674.29
905,684.64
513,288.04 Withdrawal
100,000
105,000
110,250
115,763
121,551
127,628
134,010
140,710
147,746
155,133
162,889
171,034
179,586
188,565
197,993
207,893
218,287
229,202
240,662
252,695 EB Inflation Rate
1,188,510.85
1,434,574.29
1,420,324.41
1,577,624.51
1,388,209.24
1,565,487.00
1,724,391.71
1,629,457.43
1,726,730.68
1,504,910.96
1,923,754.35
1,993,049.60
1,512,253.97
1,818,385.06
1,868,371.98
1,578,685.39
1,274,674.29
905,684.64
513,288.04
310,949.39 5% Working with define distributi
In settings want to press rand Working with define distributions in at-risk
In settings want to press random values (monte Carlo)

 


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