Unit 4.03 Outline
- Appropriate saving and investing options depend on the investors’ time and risk tolerance. Saving and investing options are:
- Savings plans
- Savings account
- Certificate of deposit (CD)
- Money market account
- Securities include stock investments, bond investments, mutual funds, and exchange-traded funds.
- Stock investments include:
- Preferred stock
- Common stock
- Bond investments include:
- Government bonds
- Municipal bonds
- U.S. savings bonds
- Other Federal Securities
- Corporate bonds
- Mutual funds
- Exchange-traded funds
- Alternative investments options are:
- Real estate
- Commodities and futures
- Agricultural
- Gold, silver, and precious metals
- Currency and financial instruments
- Collectibles
- Factors investors may consider in evaluating saving and investingoptions are:
- Safety and risk
- Potential yield
- Liquidity
- Taxes
Name: ______Class: ______Date: ______
Forbes 400 Wealthiest Individuals Activity
Directions: In an effort to better understand how wealth is tied to investing, please complete the following tasks:
- Use the list of wealthiest individuals from the website provided by your teacher.
- Complete the chart by providing information for three of the people on the Forbes 400 Wealthiest Individuals list. Choose at least one person from a country other than the United States.
Person / Age / Country / Amount and Source of Wealth / Industry / Education and Background / Summary about the person
1
2
3
What are your thoughts about the people researched and other information you obtained?
______
Name: ______Class: ______Date: ______
Saving and Investing Basics Organizer
Directions: Provide responses for the listed items.
Saving and Investing BasicsWhy do individuals, businesses, and government borrow money?
Saving influences on economic activity
Describe how saving may influence economic activity.
Saving and Investing goals
What are the main goals of saving and investing?
Savings growth
How is growth of savings measured?
Describe the types of interest / How are the different interest calculated?
Simple Interest
Compound Interest
Saving and Investing Basics Organizer (Continued)
How does the frequency of compounding interest impact the growth of savings?
______
______
Name______Class ______Date ______
Very Important Business Terms Activity
Directions: In the right-hand column of the table, describe why the terms listed in the left-hand column are important to the listed topics.
Very Important Business Terms / Why is the term important to the topic?Saving and Investing Basics
Saving / Saving is imperative to a financial plan, which makes available money for investing.
Investing
Stock Options
Preferred stock
Common stock
Stockholder
Stock exchange
Market value
Bonds and Mutual Funds Options
Municipal bonds
Corporate bonds
Mutual fund
Other Investment Options
Real estate
Equity
Assessed value
Commodities
Futures contract
Collectibles
Factors for Evaluating Saving and Investing Options
Yield
Liquidity
Very Important Business Terms Activity (Continued)
Name: ______Class: ______Date: ______
Saving Options Organizer
Directions: Provide information about the listed savings plans and provide at least two examples of when each type may be used.
Describe savings plans, include details about penalties for withdrawals, and examples.Savings Account
Examples:
Save $300 for an upcoming trip / Certificate of Deposit (CD)
Examples:
Save money for at least six months for a holiday celebration / Money Market Account
Examples:
Save money at a higher interest rate for an upcoming project
Name: ______Class: ______Date: ______
How Savings Grow Activity
Directions: Calculate the balance and interest.
Section A: Calculate simple interest.
Use the simple interest rate formula: P=Principal, R=Rate, T=Time and I=Interest Rate
P * R * T= I.
Example: $500*.03*1=$15
Principal / Rate / Time / Amount of Interest / Ending Balance$500 / 3% / 1 year / $15
$500 / 8% / 1 year
$500 / 8% / 2 years
$500 / 8% / 3 years
$4,500 / 8% / 3 years
$4,500 / 10% / 3 years
Section B: Calculate interest compounded annually.
Use the compound formula: A=Amount, P=Principal amount (the initial amount you borrow or deposit), r=Annual rate of interest (as a decimal), and n=Number of times interest is compounded
A=P(1+r/n)nt
Year / Beginning Balance / 8% Interest / Ending Balance1 / $500 / $40 / $540
2
3
4
5
Total Amount of Interest
How Savings Grow Activity (Continued)
Section C:Calculate interest compounded quarterly at 8% annual interest rate.
1.Multiply the principal (beginning balance) by ¼ of the interest rate to determine the amount of interest paid for the first quarter.
2. Multiply the (principal + first quarter interest) by ¼ of the interest rate to determine the amount of interest paid for the second quarter. Interest paid for remaining quarters is based on principal and interest paid the previous quarters.
2.Add the four quarters of interest together to determine the total interest for year.
3. Add beginning balance and total interest for the year to determine ending balance.
4.The ending balance becomes the beginning balance for the next year.
Year / Beginning Balance $500 / First Quarter / Second Quarter / Third Quarter / Fourth Quarter / Total Interest / Ending Balance1
2
3
4
5
6
Compound Interest Screenshot
As young as you are, you may not have given much thought to how much you’ll need when you retire. This activity can help you begin to understand that, with not much money and a little discipline, you can grow your retirement nest egg to a sizable sum.
Opne the following link, Using the Savings tab, begin to explore the factors involved in a long term saving strategy can help you understand the beauty of Compound Interest.
As you explore this topic, take five Screenshots with different savings variables and drop them into this document.
Begin your screenshots here…
Catch Me If You Can
As you watch the story of Frank Abagnale Jr., analyze how Frank learns the financial system with its strengths and weaknesses to live his early life.
Pay specific attention to how the “money flow” works as it relates to the Federal Reserve, and how Abagnale uses that to his advantage.
Then, write a short, half page essay about the movie, specifically outlining the “financial threads” that run through this story.
How Savings Grow Activity(Continued)
Section C: Calculate interest compounded quarterly at 8% annual interest rate.
1.Multiply the principal (beginning balance) by ¼ of the interest rate to determine the amount of interest paid for the first quarter.
2. Multiply the principal + first quarter interest by ¼ of the interest rate to determine the amount of interest paid for the second quarter. Interest paid for remaining quarters is based on principals and interest paid the previous quarters.
3.Add the four quarters of interest together to determine the total interest for year.
4. Add beginning balance and total interest for the year to determine ending balance.
5.The ending balance becomes the beginning balance for the next year.
Year / Beginning Balance $500.00 / First Quarter / Second Quarter / Third Quarter / Fourth Quarter / Total Interest / Ending Balance1 / $500.00 / 10.00 / 10.20 / 10.40 / 10.61 / 41.21 / 541.21
2 / $541.21 / 10.82 / 11.04 / 11.26 / 11.49 / 44.61 / 585.82
3 / $585.82 / 11.72 / 11.95 / 12.19 / 12.43 / 48.29 / 634.11
4 / $634.11 / 12.68 / 12.94 / 13.19 / 13.46 / 52.27 / 686.38
5 / $686.38 / 13.73 / 14.00 / 14.28 / 14.57 / 56.68 / 742.96
6 / $742.96 / 14.86 / 15.16 / 15.46 / 15.77 / 16.08 / 820.29
Name: ______Class: ______Date: ______
Stock Options Organizer
Directions: Provideinformation about the listed items.
Main types of stocksPreferred stock description / Common stock description
Similarities between common and preferred stock
Differences between common and preferred stock
Possible activities involved in trading stocks
Describe the role of stockbrokers.
What is the purpose of the stock exchange?
Stock Options Organizer(Continued)
What is market value of stock?
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Stock Table
A / B / C / D / E / F / G / H / I52 Week / Sales
High / Low / Stock / Div / Yld / PE / Vol 100s / High / Low / Last / Chg
12 1/8 / 8 / AAR / .44 / 6.2 / 15 / 6 / 6 3/4 / 6 5/8 / 6 1/2 / -1/8
49 1/2 / 31 1/4 / ACF / 1.76 / 7.4 / 7 / 477 / 36 1/4 / 37 5/8 / 37 / +3/4
26 1/2 / 16 / AMF / 1.36 / 6.7 / 7 / 133 / 17 1/2 / 17 1/2 / 17 1/2 / -3/8
6 1/8 / 3 1/8 / ARA / 2 / 7 / 8 / 10 / 33 7/8 / 33 7/8 / 33 / -1
Using the information from the above stock table, provide a description of the content of each column.
A. ______
B. ______
C. ______
D. ______
E. ______
F. ______
G. ______
H. ______
I. ______
Stock Options Organizer(Continued)
Identify economic factors that could influence investors in deciding on types of stocks?
1. ______
2. ______
3. ______
4. ______
Company factors that could influence investors in deciding on stock options
Dividend Yield / Price-earnings (P/E) ratioDescribe how dividend information may be used by investors and list the formula. / Describe how price-earnings information may be used by investors and list the formula.
Calculating yield formulaExample
Current value=closing price for the day68.95
Original price=value paid for stock45.00
Yield=Percentage of money earned 53%
current value – original price = yield68.95-45 = 53%
original value 45
Stock / Original price / Current Value / YieldStock A / $70.14 / $78.01
Stock B / $44.82 / $45.79
Stock C / $40.47 / $43.50
Name: ______Class: ______Date: ______
Comparing Stocks Activity
Directions: Using the website as a resource, provide the requested information.
Company / Company 1 / Company 2Name of company
Stock symbol (Use search command under file to locate company and display stock chart)
Price one year ago (Use company tab located at the bottom center of the chart. Click on chart for closing price.)
Price six months ago
Price one day ago
What is the difference in the stock prices for the past three years?
Based on knowledge, what factors may have impacted the prices?
Based on price performances, would you trade any shares of the stock? Why?
Name: ______Class: ______Date: ______
Bonds and Funds Organizer
Directions: Provide requested information for the listed items.
Bonds
Why are bonds issued?What type of bonds do city and state government levels issue and why?
Describe the types of bonds and other federal securities the federal government issues.
Describe the types of bonds issued by companies.
Describe the difference between investing in company stocks and bonds as it relates to being an owner verses being a lender.
Stocks / Bonds
How does stated interest rate impact the value of a bond?
Bonds and Funds Organizer (Continued)
Mutual and Exchange-Traded Funds (ETF)
Describe possible tasks completed by investment companies to assist investors with mutual funds. ______
______
______
Main types of mutual funds
Name of mutual fund / Description of mutual fundDescribe exchange-traded funds.
______
Name: ______Class: ______Date: ______
Comparing Mutual and Exchange-Traded Funds Activity
Directions: Display in a graphic organizer how mutual funds and exchange-traded funds are similar and different using the characteristics in the provided scenario.
Melissa convinced David to invest money in fund securities since a variety of securities will be included. Melissa invested in mutual-funds and David invested in exchange-traded funds. Melissa liked that her dividends would be reinvested so that she could possibly earn more. David read his investment portfolio again, and realized that dividends earned on his funds are usually not reinvested.
He started his account with $400 by his choice. He did not have to adhere to a minimum amount. Melissa started her mutual fund investment with a balance of $5,000. She regretted having to start her account with that large amount of money. Melissa and David know that they will have to pay fees for their investment transactions and they will face different levels of risks. Melissa kept up with the value of her mutual funds regularly at the end of closing days of trading since that is when values are available. David could check the value of his exchange-traded funds anytime. They are both looking forward to earning dividends.
Name: ______Class: ______Date: ______
Comparing Bond Investments Activity
Directions: Provide requested information for the listed items using the website .
Comparing Bonds Table
Bond Information / Bond 1 / Bond 2Issuer of NC municipal bond
Bond current yield
Bond semiannual yield
Bond annual yield
Based on the above information, describe the bond performance.
Issuer of government bond
Treasurycurrent yield
Treasury yield for one month
Treasury yield for one year
Based on the above information, describe the treasury performance.
Comparing Bond Investments(Continued)
Bond Information / Bond 1 / Bond 2Issuer of corporate bond
Bond current yield
Bond semiannual yield
Bond annual yield
Based on the above information, describe the bond performance.
Name: ______Class: ______Date: ______
The Right Type of Mutual Fund Activity
Directions: Match the mutual fund in the left-hand column with the most appropriate situation in the right-hand column by placing the alphabet representing the situation next to the mutual fund.
Type of mutual fund / Situation to use mutual fundAggressive–growth stock funds ______/ A. Ben wants to invest in primarily in stocks from other countries such as Japan, India, China, South Africa, and Australia.
Income funds ______/ B. Tish wants help in investing in companies that specialize in the entertainment industry.
International funds ______/ C. Ted wants a portfolio that consists of him owning shares and loaning money.
Sector funds ______/ D. Mary, a high school senior, wants high dividends on a mutual fund investment for a period of one to four years. She plans to use the money for a trip abroad for three months after graduating from college. She is willing to risk her entire savings of $5,000.
Bond funds ______/ E. Jack prefers to receive pay regularly from his investments.
Balanced funds ______/ F. Ann wants to invest in a portfolio that consists primarily of companies such as Verizon, Humana, and General Electric.
Name: ______Class: ______Date: ______
Other Investments (real estate, commodities, and collectibles) Organizer
Directions: Discuss the requested item listed in the table.
Type of Investment / Description / ExamplesReal Estate
Advantages of investing in real estate
Disadvantages of investing in real estate
Commodities and futures
Collectibles
Saving and Investing Evaluation Factors Organizer Guide Directions for Teacher
Allow students to develop an organizer of factors for evaluating saving and investing options. Use the items in the table as a guide to determine appropriate content for students to include in organizer.
Factors for evaluating saving and investing options / DescriptionSafety and risk / Guarantee of money invested to be returned
Diversity of investment options
Low tolerance risk
High tolerance risk
Potential return / Acceptable yield
High yield
Low yield
Liquidity / High liquidity
Low liquidity
Taxes / Taxed earnings
Tax-exempt earnings
Name: ______Class: ______Date: ______
Which Option is Best Activity
Directions: Your financial planning team is to complete the following for two clients from the Clients Table. Your teacher may assign your team’s clients.
- Among the investment categories determine which investment options would most likely meet the expectations of your clients.
- Develop an investment portfolio, including justification for options recommended, for each client. Be prepared to present investment portfolios
Clients Table
Name / Age / Personal goals / Funds available to invest / Comments made by clientsPhyllis Jones / 25 / High Risk / $4,500 / “Roll the dice with my money!”
Amare Williamson / 72 / Low Risk / $1,800,000 / “I am concerned about providing for my family.”
Reggie Creed / 44 / Moderate Risk / $200,000 / “I want to make sure my money will grow long term.”
Hong Chao / 40 / High Risk / $500,000 / “I am considering purchasing a new house in the next two years.”
Amanda Vasquez / 30 / Low Risk / $90,000 / “I don’t really know much about investments.”
Which Option is Best Activity(Continued)
1. Savings
Company / Type / Rate / TimeFirst Financial / Savings account / 1% / N/A
Citizen’s Bank of Anytown / Savings Account / 1.25% / N/A
The High-Yield Savings Mutual Fund / Mutual Fund / 3.5% / N/A
First Federal Bank / CD / 3% / 5 years
Joe’s Savings and Auto Loans / Pawn Shop / 5% / N/A
- Low Risk Stocks
Company / Stock price / Industry / Estimated
return / Dividend (per year)
Falcon Industries / $58 / Defense / 3% / $2.60
Greater Office Operation Processing / $24 / Office Products / 6% / $1.25
Prudential Unlimited / $15 / Energy / 4% / $2.50
Practer and Gimble / $110 / Home Products / 6% / none
Fig Bars Unlimited / $28 / Foods / 5% / $3.00
- Medium Risk Stocks
Company / Stock price / Industry / Estimated
return / Dividend (per year)
Nickel Defense, Inc. / $32 / Defense / 3% / $2.00
Petal to the Medal / $66 / Flowers / 6% / $1.00
Online learning, Inc. / $89 / Education / 4% / $3.50
ABM / $41 / Technology / 6% / $0.50
Rocketworks / $12 / Aerospace / 5% / $1.50
Which Option is Best Activity (Continued)
- High Risk Stocks
Company / Stock price / Industry / Estimated
return / Dividend (per year)
Icecream.com / $115 / Internet / 28% / none
Best Games / $38 / Video games / 19% / none
EPod, Inc. / $167 / Consumer electronics / 15% / none
Termpapers.com / $99 / Internet / 50% / none
Preventasick / $28 / Pharmaceutical / 29% / $0.15
- Bonds
Company / Interest / Industry / Face Value of Bond / Price of Bond
General Meters / 3.3% / Defense / $1,000 / $900
Tastee Cones / 2.4% / Office Products / $5,000 / $4,500
The Steak Mart, Inc. / 5.0% / Energy / $10,000 / $10,500
Frank’s Used Autos / 8.5% / Home Products / $100,000 / $120,000
Energy Dynamics / 2.0% / Foods / $2,000 / $1,700
5.03Which Option is Best Activity (Continued)
- Mutual Funds
Company / Fund price / Type / Estimated
return / Cost
Fidelitar Top 500 / $23 / Tracks 500 largest U.S. companies / 9% / 3% load
1% annual fee
Berdugo Low-Priced Stock / $14 / Invests in undervalued stocks / 8% / 2% load
2% annual fee
Crown Biotechnology / $85 / Invests in only biotechnology companies / 19% / 3% load
5% annual fee
Weiland Dow Industrials / $60 / Invests in Dow Industrials stocks / 9% / 2% load
2% annual fee
Stone Capital Health Care / $29 / Invests only in health care companies / 15% / 3% load
6% annual fee
- Real Estate
Types / Price / Reason / Estimated
appreciation (per year) / Estimated net Income (per year)
Residential / $200,000 / Personal Home / 3% / N/A
Residential / $500,000 / Rental / 4% / $5,000
Commercial / $1,600,000 / Rental / 6% / $100,000
Commercial / $250,000 / Rental / 3% / $5,000
Vacant Land / $100,000 / Speculation / 8% / N/A
Which Option is Best Activity (Continued)
- Commodities
Commodity / Futures Price / Estimated
cost in future / Risk level
Corn / $23 / $25 / moderate
Wheat / $10 / $14 / moderate
Gold / $17 / $21 / low
Timber / $45 / $49 / high
Oil / $44 / $70 / high
- Collectibles
Type / Cost / Estimated
return / Risk level
1909 Honus Wagner baseball card / $164,000 / ? / High
1978 Luke Skywalker action figure / $525 / ? / High
1860 Letter from Abe Lincoln / $1,100,000 / ? / High
1965 Ford Mustang convertible / $35,000 / ? / High
1982 Entire set of original Transformers action figures / $3,500 / ? / high
Team members ______Date ______