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 bonds have paid $3\mathrm{.}0\%$ interest. The rate of inflation is $2\mathrm{.}5\%.$ 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 $\_\_\_\_\_\_\_.$ This consists of $\_\_\_\_$ in cash and cash equivalents, in bonds, and $\_\_\_\_$ in equities.

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 conservative.

The investment strategy is moderate.

The investment strategy is aggressive.

Given the existing composition of your investment portfolio, how would you characterize your risk tolerance? Are you risk averse, risk neutral, or risk seeking?

You appear to be risk averse.

You appear to be risk neutral.

You appear to be risk seeking.

Think about the government bonds in your portfolio. To what kind of risk are you most susceptible because of this investment?

Business failure risk

Liquidity risk

Inflation risk

Marketability risk

Foreign exchange 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

Pure risk

Both market $($systematic$)$ and random $($unsystematic$)$ risks

Only liquidity risk

Only market, or systematic, risk

Do you perceive a deficiency of some type in your equity holdings, and if so$,$ of what type?

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

Consider the following table of recommended asset allocation percentages of cash$/$bonds$/$equity:

Risk tolerance $/$ Investment strategy

$0-5$ years

$6-10$ years

$11+$ years

Low risk $/$ Conservative $35/40/2520/40/4010/30/60$

Moderate risk $/$ Moderate $20/40/4010/30/600/20/80$

High risk $/$ Aggressive $10/30/600/20/800/0/100$

If you believe that the allocation of assets in your portfolio should be modified to meet your retirement needs, then it is recommended that your holding of: Check all that apply.

Bonds be decreased

Cash and cash equivalents be decreased

Cash and cash equivalents be increased

Equities be decreased

Equities be increased

Bonds be increased

Financial experts recommend that you should review and rebalance your investment portfolio at least once every $.$

Which of the following statements is true regarding the dollar$-$cost averaging strategy? Check all that apply.

Using this strategy, you can purchase a larger number of shares in a rising market than in a declining market.

For this strategy to be successful, you must be lucky and knowledgeable; discipline is irrelevant.

An advantage of dollar$-$cost averaging is that it can reduce the average cost of purchased shares over a long investment period.

Dollar$-$cost averaging is successful in a rising, fluctuating, or declining market.

An advantage of dollar$-$cost averaging is that it imposes$$and requires$$investor discipline.

As a long$-$term investor, how should you respond to a bear market?

Sell quickly to "stop the bleeding."

Continue with your investment plan; it is good to buy while the prices are low.

Hold tight; do not sell, but do not continue investing.