EXERCISE #2: Historically the S&P 500 Index has returned about 8% a year but returns are very uneven as recent experience has reminded us - the INDEX declined by more than 50% from its peak in 2007 and took 7 years to attain that peak level again. This year the S&P 500 Index has gained over 20% but last year it declined by over 6%.%. In contrast a typical Money Market Fund has returned about 2% a year with minimal fluctuation. Given this, evaluate the following: a) You are considering spending several thousand dollars to purchase a common stock "S&P 500" Index Fund. Assuming that you plan to use this money as a house down payment 1 year from now, how risky would you consider this investment? Briefly discuss your perception of risk in this decision, given your objective. Very low risk Very high risk 1 2 3 4 5 6 7 Briefly explain your decision: b) How risky would it be if you planned to use this "S&P 500" Index Fund as the major component of your retirement funds, 40 years from now? Briefly discuss your perception of risk in this decision, given your objective. Very high risk Very low risk 1 2 Briefly explain your decision: 3 4 5 6 c) You are considering investing several thousand dollars in a Money Market fund. If you plan to use this money as down payment on a house 1 year from now, how risky would you consider this investment? Briefly discuss your perception of risk in this decision, given your objective. Very low risk Very high risk 2 3 4 5 6 7 Briefly explain your decision: creenshot