Go to www.moneychimp.com. Select the link Volatility. Complete the retirement planning calculator, making the assumptions that you believe are appropriate for you. Then go to the Monte Carlo simulation calculator. Assume that you invest in large-company common stocks during your working years and then invest in long term corporate bonds during retirement. Use the nominal average returns and standard deviations shown in Figure 6-2. What did you learn?

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FIGURE 6-2 Historical Rates of Return Securities Small- company stocks Large- company stocks Intermediate-term government bonds Corporate bonds U.S. Treasury bills Nominal Average Annual Returns 16.7% 12.1% 6.3% 6.1% 3.5% Standard Deviation of Returns 32.1% 20.1% 5.6% 8.4% 3.1% Real Average Annual Returnsa 4.1% 13.8% 9.2% 3.4% 3.2% 0.6% Risk Premiumb 13.2% 8.6% 2.8% 2.6% 0.0% Inflation 2.9% *The real return equals the nominal returns less the inflation rate of 2.9 percent. The risk premium equals the nominal security return less the average risk-free rate (Treasury bills) of 3.5 percent.