Historically the S&P 500 Stock 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 (2019) the S & P 500 Index has gained about 10% through todays date after declining almost 10% for last year( 2018). It has since recovered. 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 Very high

risk ____ ____ ____ ____ ____ ____ ____ risk

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Briefly explain your decision: (2 points)