In class finance simulation

You will use three dice to simulate the uncertainty in financial markets. There are three basic instruments in this simplified market, each associated with a single die.

1. Before starting the simulation, which of the three investments looks most appealing to you? Does the group agree (have a consensus) or is it not so clear?
2. The rest of this assignment deals with a small simulation of these three financial instruments represented by the dice described above. For each "year" of the game, you will roll all three dice, and use the outcomes to determine what has happened to the value of each investment. Each of the three investments starts off with an initial value of $1000. Run the game out for 25 years. Did you pick the winner? Do you want to change your opinion of which is best?

The following table shows how the rolls of the dice affect the values of the three investments.

Roll	Green	Red	White
1	0.8	0.06	0.9
2	0.9	0.2	1
3	1.05	1	1
4	1.1	3	1
5	1.2	3	1
6	1.4	3	1.1

For example, suppose that on the first roll of all three dice, you obtain

(Green 2) (Red 5) (White 3)

Then the values of the investments after the first year become

Green:	$1000 * 0.9	= $900
Red:	$1000 * 3	= $3000
White:	$1000 * 1	= $1000

For the next roll, the values are compounded from these. Suppose that on the second roll of all three dice, you obtain


(Green 4) (Red 2) (White 6)


then the values of the three investments after two years are


Green:	$900 * 1.1	= $990
Red:	$3000 * .2	= $600
White:	$1000 * 1.1	= $1100

3. Now considers the performance of a hybrid investment, one which mixes the outcomes of "Red"; and "White". To compute the value of this investment, roll both the red and white dice for each round. It’s easiest to describe what to do with an example. For the first round, using the same dice rolls as above (Green 2), (Red 5) and (White 3), the value of this "Pink" investment is
   
   Pink: $1000 * (3 + 1)/2 = $2000
   and compounded in the second round which had (Green 4), (Red 2), and (White 6)
   
   Pink: $2000 * (0.2 + 1.1)/2 = $1300 Before doing any simulating, what do you think of this hybrid?
   Simulate the hybrid. (Or if you have the rolls you made the first time around, use those rolls.) What happens? How does it compare to the previous instruments? Which of the 4 investments do you like the best now?