# Now that Jennifer is in middle school, her parents have decided that they really must start saving

## Question:

Assume that the initial investment ($10,000) is made right now (year 0) and is split evenly between the two funds (i.e., $5,000 in each fund). The returns of each fund are allowed to accumulate (i.e., are reinvested) in the same fund and no redistribution will be done before Jennifer starts college. Furthermore, four additional investments of $4,000 will be made and split evenly between both funds ($2,000 each) at the end of year 1, year 2, year 3, and year 4, plus another $4,000 of savings will be available at the end of year 5, just in time for Jennifer to begin college. Use a 1000-trial ASPE simulation to estimate each of the following.

(a) What will be the expected value (mean) of the college fund at the end of year 5?

(b) What will be the standard deviation of the college fund at the end of year 5?

(c) What is the probability that the college fund at the end of year 5 will be at least $35,000?

(d) What is the probability that the college fund at the end of year 5 will be at least $40,000?

Distribution

The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...

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**Related Book For**

## Introduction to Operations Research

**ISBN:** 978-1259162985

10th edition

**Authors:** Frederick S. Hillier, Gerald J. Lieberman