Modify the model from Example 16.6 so that you use only the years 1975 to 2007 of historical...

Modify the model from Example 16.6 so that you use only the years 1975 to 2007 of historical data. Run the simulation for the same three sets of investment weights. Comment on whether your results differ in any important way from those in the example.

EXAMPLE 16.6

INVESTING FOR RETIREMENT

Attorney Sally Evans has just begun her career. At age 25, she has 40 years until retirement, but she realizes that now is the time to start investing. She plans to invest $1000 at the beginning of each of the next 40 years. Each year, she plans to put fixed percentages—the same each year—of this $1000 into stocks, Treasury bonds (T-bonds), and Treasury bills (T-bills). However, she is not sure which percentages to use. (We call these percentages investment weights.) She does have historical annual returns from stocks, T-bonds, and T-bills from 1946 to 2007. These are listed in the file Retirement Planning.xlsx. This file also includes inflation rates for these years. For example, for 1993 the annual returns for stocks, T-bonds, and T-bills were 9.99%, 18.24%, and 2.90%, respectively, and the inflation rate was 2.75%. Sally would like to use simulation to help decide what investment weights to use, with the objective of achieving a large investment value, in today’s dollars, at the end of 40 years.