1. Apply What You've Learned - Investment Fundamentals Scenario: You are 40 years old. Your investment portfolio currently consists of: (1) a savings account, with a $16,000 balance, (2) certificates of deposit (CDs) worth $20,000, and (3) an investment portfolio consisting of 40% bonds, 40% equities, and 20% cash and cash equivalents. Your bonds are thirty-year U.S. government bonds, while your equities are made up solely of your employer's stock. Your cash holdings consist of your savings account and CDs. Your employer's stock paid a 1% dividend and its market value has increased 10% over the last year. The bands have paid 4.0% interest. The rate of inflation is 2.75%. Your investment goals are mainly focused on retirement, and you have no large purchases planned in the short term. The value of your current investment portfolio is bonds, and In equities This consists of 36,000 in cash and cash equivalents. Given the existing composition of your investment portfolio, how would you characteristic your investment strategy? Is it conservative, moderate, or aggressive? The investment strategy is aggressive. The investment strategy is conservative. The investment strategy is moderate. Given the existing composition of your investment portfolio, how would you characterize your risk tolerance? Are you risk verse, Hak neutral, or risk seeking? You appear to be risk averse. You appear to be rick seeking You appear to be risk neutral Think about the government bonds in your portfolio. To what kind of risk are you most susceptible because of this investment? Foreign exchange risk Business failure risk Marketability risk Inflation risk O Liquidity risk The real return on your government bonds is Think about the stock in your investment portfolio. To what type of risk (or risks) are you most susceptible? Only random, or unsystematic, risk O Both market (systematic) and random (unsystematic) risks Pure risk Only market, or systematic, risk Only liquidity risk Do you perceive a deficiency of some type in your equity holdings, and if so, of what type? o Yes, my current equity holdings are inadequately diversified Yes, according to the concept of asset allocation, I have too much stock in my portfolio No, it is better to invest in one company that you know really well than in companies you don't know as well No, my current equity holdings are appropriately diversified