Marcus is 25 years old. He has a new job and intends to save $10,000 today and in each of the next 34 years (35 deposits altogether). He has decided on an investment policy in which he invests 30% of his assets in a risk-free bond with 3% continuously compounded annual interest and the remainder in the market portfolio that has lognormal returns ? = 12% and ? = 35%. Write a spreadsheet showing Marcus?s accumulation by the time he is 60. A sample output is given below:

Transcribed Image Text:

B MARCUS'S INVESTMENT/SAVINGS DECISION A D E 1 2 Annual deposit 3 Risk-free rate 4 Market portfolio mean 5 Market portfolio sigma 6 Proportion in market portfolio 7 Accumulation at age 60 10,000 3% 12% 35% 70% 12,048,869 <- =B45 8 Total investment at Total beginning of New investment at 9 Age 25 investment end of period period 13,065.44 27,795.31 =(B10+C10)*($B$6*EXP($B$4+ 52,906.64 $B$5*NORM.S.INV(RAND()))+(1- 58,590.40 99,352.45 10 10,000 <-- 10,000 13,065.44 27,795.31 52,906.64 58,590.40 11 26 12 27 10,000 13 28 10,000 $B$6)*EXP($B$3)) 14 29 10,000