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Microsoft® Office Excel® 2007: Data Analysis and Business Modeling, Second Edition by Wayne L. Winston

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Chapter 62. Simulating Stock Prices and Asset Allocation Modeling

  • 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 10 percent and minimize risk?

The last few years have shown us that future returns on our investments are highly uncertain. In this chapter, I’ll explain a relatively simple approach to assessing uncertainty in future investment returns. This approach is based on the idea of bootstrapping. Essentially, bootstrapping simulates future investment returns ...

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