Microsoft Excel Data Analysis and Business Modeling (Office 2021 and Microsoft 365), 7th Edition

Chapter 81

Simulating stock prices and asset-allocation modeling

Questions answered in this chapter:

• I recently bought 100 shares of GE stock. What is the probability that during the next year this investment will return more than 10 percent?

• I’m trying to determine how to allocate my investment portfolio between stocks, T-bills, and bonds. What asset allocation over a five-year planning horizon will yield an expected return of at least 8 percent and minimize my risk?

The last few years have shown that future returns on investments are highly uncertain. Chapter 64, “Using the lognormal random variable to model stock prices,” showed you how to use the lognormal random variable to model stock prices. However, many financial experts are critical ...