Part II: Answer the following short answer/problem solving questions. (12 points each * ) = 60 points) 1. Define money and discuss its various functions. Is debit card money? What about credit cards? Why? Why not? Explain. 2. Bonds are risky due to default risk, liquidity risk, inflation risk, and interest-rate risk. Explain each of these risk. 3. Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk. Show your work. Investment.4: Total return = 15 percent with probability 40 percent Total return = 25 percent with probability 60 percent Investment B: Total return = 15 percent with probability 50 percent Total return = 25 percent with probability 50 percent Investment C: Total return = 15 percent with probability 60 percent Total return = 25 percent with probability 40 percent a. Which investment provides the highest expected return? Calculate the expected return of all three investments. b. Calculate the standard deviation of all three investments. c. Which of the three investments would you buy? Why? Explain. 4. Consider a ten-year coupon bond that has a present value of $10,000. If the rate of discount is 5 percent, and the payment made at the end of each year is $500, what is the principal amount to be repaid at the end of ten years? Show your work. 5. Suppose after you graduate from Algoma University, you find a job that pays you $75,000 a year. Further suppose that you take out a home equity loan of $360,000 for 30 years at an annual interest rate of 3.5 percent, with payments to be made monthly. What will your monthly payments be? If the interest rate increases from 3.5 percent to 5.0 percent, how much will your monthly payments increase? Instead of 30 years, you decide to pay your loan in 25 years, what will your monthly payments be if the interest rate remains at 3.5 percent of increases to 5.0 percent. Develop a chart comparing these monthly payments. Show your work