Total Amount of Interest - Winston-Salem/Forsyth County ...



Unit 4.03 OutlineAppropriate saving and investing options depend on the investors’ time and risk tolerance. Saving and investing options are:Savings plansSavings accountCertificate of deposit (CD)Money market accountSecurities include stock investments, bond investments, mutual funds, and exchange-traded funds.Stock investments include:Preferred stock Common stock Bond investments include: Government bonds Municipal bondsU.S. savings bonds Other Federal SecuritiesCorporate bonds Mutual fundsExchange-traded fundsAlternative investments options are:Real estateCommodities and futuresAgriculturalGold, silver, and precious metalsCurrency and financial instrumentsCollectiblesFactors investors may consider in evaluating saving and investing options are:Safety and riskPotential yieldLiquidityTaxesName: ______________________ Class: _______ Date: _______Forbes 400 Wealthiest Individuals ActivityDirections: 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 plete 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.PersonAgeCountryAmount and Source of WealthIndustryEducation and BackgroundSummary about the person123What are your thoughts about the people researched and other information you obtained?__________________________________________________________________________________________________________________________________________________________________________________________________Name: ______________________ Class: _______ Date: _______Saving and Investing Basics OrganizerDirections: Provide responses for the listed items. Saving and Investing BasicsWhy do individuals, businesses, and government borrow money?Saving influences on economic activityDescribe how saving may influence economic activity.Saving and Investing goalsWhat are the main goals of saving and investing?Savings growthHow is growth of savings measured?Describe the types of interestHow are the different interest calculated?Simple InterestCompound InterestSaving and Investing Basics Organizer (Continued)How does the frequency of compounding interest impact the growth of savings?__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Name_________________________ Class ________________Date _________Very Important Business Terms ActivityDirections: 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 TermsWhy is the term important to the topic?Saving and Investing BasicsSavingSaving is imperative to a financial plan, which makes available money for investing.InvestingStock OptionsPreferred stockCommon stockStockholderStock exchangeMarket valueBonds and Mutual Funds OptionsMunicipal bondsCorporate bondsMutual fundOther Investment OptionsReal estateEquityAssessed valueCommodities Futures contractCollectiblesFactors for Evaluating Saving and Investing OptionsYieldLiquidityVery Important Business Terms Activity (Continued)Name: ______________________ Class: _______ Date: _______Saving Options OrganizerDirections: 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 AccountExamples:Save $300 for an upcoming tripCertificate of Deposit (CD)Examples:Save money for at least six months for a holiday celebrationMoney Market AccountExamples:Save money at a higher interest rate for an upcoming project Name: ______________________ Class: _______ Date: _______How Savings Grow ActivityDirections: 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=$15PrincipalRateTimeAmount of InterestEnding Balance$5003%1 year$15$5008%1 year$5008%2 years$5008%3 years$4,5008%3 years$4,50010%3 yearsSection 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 compoundedA=P(1+r/n)ntYearBeginning Balance8% InterestEnding Balance1$500$40$5402345Total Amount of InterestHow Savings Grow Activity (Continued)Section C: Calculate interest compounded quarterly at 8% annual interest rate. 1.Multiply the principal (beginning balance) by ? of the interest rate to determine the amount of interest paid for the first quarter.2. Multiply the (principal + first quarter interest) by ? 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.YearBeginning Balance $500First QuarterSecond QuarterThird QuarterFourth QuarterTotal InterestEnding Balance123456Compound Interest ScreenshotAs 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 CanAs 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 ? of the interest rate to determine the amount of interest paid for the first quarter.2. Multiply the principal + first quarter interest by ? 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.YearBeginning Balance $500.00First QuarterSecond QuarterThird QuarterFourth QuarterTotal InterestEnding Balance1$500.0010.0010.2010.4010.6141.21541.212$541.2110.8211.0411.2611.4944.61585.823$585.8211.7211.9512.1912.4348.29634.114$634.1112.6812.9413.1913.4652.27686.385$686.3813.7314.0014.2814.5756.68742.966$742.9614.8615.1615.4615.7716.08820.29 Name: ______________________ Class: _______ Date: _______Stock Options OrganizerDirections: Provide information about the listed items.Main types of stocksPreferred stock descriptionCommon stock descriptionSimilarities between common and preferred stockDifferences between common and preferred stockPossible activities involved in trading stocksDescribe the role of stockbrokers.What is the purpose of the stock exchange?Stock Options Organizer (Continued)What is market value of stock?---------------------------------------------------------------------------------------------------------------------Stock TableABCDEFGHI52 WeekSalesHighLowStockDivYldPEVol 100sHighLowLastChg12 1/8 8AAR .446.215 6 6 3/4 6 5/8 6 1/2-1/849 1/231 1/4ACF1.767.4 747736 1/437 5/8 37 +3/426 1/216AMF1.366.7 713317 1/217 1/217 1/2-3/8 6 1/8 3 1/8ARA 2 7 8 1033 7/833 7/8 33-1Using 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 optionsDividend YieldPrice-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 formulaExampleCurrent value=closing price for the day68.95Original price=value paid for stock45.00Yield=Percentage of money earned 53%current value – original price = yield68.95-45 = 53% original value 45StockOriginal priceCurrent ValueYieldStock A$70.14$78.01Stock B$44.82$45.79Stock C$40.47$43.50Name: ______________________ Class: _______ Date: _______Comparing Stocks ActivityDirections: Using the website as a resource, provide the requested information. CompanyCompany 1Company 2Name of companyStock 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 agoPrice one day agoWhat 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. BondsWhy 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.StocksBondsHow 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 fundsName of mutual fundDescription of mutual fundDescribe exchange-traded funds.__________________________________________________________________________________________________________________________________________________________________________________________________________________Name: ______________________ Class: _______ Date: _______Comparing Mutual and Exchange-Traded Funds ActivityDirections: 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 ActivityDirections: Provide requested information for the listed items using the website marketataglance.asp?catid-32 .Comparing Bonds TableBond InformationBond 1Bond 2Issuer of NC municipal bondBond current yieldBond semiannual yield Bond annual yield Based on the above information, describe the bond performance.Issuer of government bondTreasury current yield Treasury yield for one monthTreasury yield for one yearBased on the above information, describe the treasury paring Bond Investments (Continued)Bond InformationBond 1Bond 2Issuer of corporate bondBond current yieldBond semiannual yieldBond annual yieldBased 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 fundSituation 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 InvestmentDescriptionExamplesReal EstateAdvantages of investing in real estateDisadvantages of investing in real estateCommodities and futuresCollectiblesSaving 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 optionsDescriptionSafety and riskGuarantee of money invested to be returnedDiversity of investment optionsLow tolerance riskHigh tolerance riskPotential returnAcceptable yieldHigh yieldLow yieldLiquidityHigh liquidityLow liquidityTaxesTaxed earningsTax-exempt earningsName: ______________________ 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 portfoliosClients TableNameAgePersonal goalsFunds available to investComments made by clientsPhyllis Jones25High Risk$4,500“Roll the dice with my money!”Amare Williamson72Low Risk$1,800,000“I am concerned about providing for my family.”Reggie Creed44Moderate Risk$200,000“I want to make sure my money will grow long term.”Hong Chao40High Risk$500,000“I am considering purchasing a new house in the next two years.”Amanda Vasquez30Low Risk$90,000“I don’t really know much about investments.”Which Option is Best Activity (Continued) 1. SavingsCompanyTypeRateTimeFirst FinancialSavings account1%N/ACitizen’s Bank of AnytownSavings Account1.25%N/AThe High-Yield Savings Mutual FundMutual Fund3.5%N/AFirst Federal BankCD3%5 yearsJoe’s Savings and Auto LoansPawn Shop5%N/ALow Risk StocksCompanyStock priceIndustryEstimatedreturnDividend (per year)Falcon Industries $58Defense3%$2.60Greater Office Operation Processing$24Office Products6%$1.25Prudential Unlimited $15Energy4%$2.50Practer and Gimble $110Home Products6%noneFig Bars Unlimited $28Foods5%$3.00Medium Risk StocksCompanyStock priceIndustryEstimatedreturnDividend (per year)Nickel Defense, Inc.$32Defense3%$2.00Petal to the Medal$66Flowers6%$1.00Online learning, Inc.$89Education4%$3.50ABM$41Technology6%$0.50Rocketworks$12Aerospace5%$1.50Which Option is Best Activity (Continued)High Risk StocksCompanyStock priceIndustryEstimatedreturnDividend (per year)$115Internet28%noneBest Games$38Video games19%noneEPod, Inc.$167Consumer electronics15%$99Internet50%nonePreventasick$28Pharmaceutical29%$0.15BondsCompanyInterestIndustryFace Value of BondPrice of BondGeneral Meters3.3%Defense$1,000$900Tastee Cones2.4%Office Products$5,000$4,500The Steak Mart, Inc.5.0%Energy$10,000$10,500Frank’s Used Autos8.5%Home Products$100,000$120,000Energy Dynamics2.0%Foods$2,000$1,700Which Option is Best Activity (Continued)Mutual FundsCompanyFund priceTypeEstimatedreturnCostFidelitar Top 500$23Tracks 500 largest U.S. companies 9%3% load1% annual feeBerdugo Low-Priced Stock$14Invests in undervalued stocks8%2% load2% annual feeCrown Biotechnology$85Invests in only biotechnology companies19%3% load5% annual feeWeiland Dow Industrials$60Invests in Dow Industrials stocks9%2% load2% annual feeStone Capital Health Care$29Invests only in health care companies15%3% load6% annual feeReal EstateTypesPriceReasonEstimatedappreciation (per year)Estimated net Income (per year)Residential$200,000Personal Home3%N/AResidential$500,000Rental4%$5,000Commercial$1,600,000Rental6%$100,000Commercial$250,000Rental3%$5,000Vacant Land$100,000Speculation8%N/AWhich Option is Best Activity (Continued)CommoditiesCommodityFutures PriceEstimatedcost in futureRisk levelCorn$23$25moderateWheat$10$14moderateGold$17$21lowTimber$45$49highOil$44$70highCollectiblesTypeCostEstimatedreturnRisk level1909 Honus Wagner baseball card $164,000?High1978 Luke Skywalker action figure$525?High1860 Letter from Abe Lincoln$1,100,000?High1965 Ford Mustang convertible$35,000?High1982 Entire set of original Transformers action figures$3,500?highTeam members _______________________________Date ________________Scoring Rubric for Which Option is BestAdvanced, proficient, progressing, and beginning levels are based on whether tasks criteria are met.Advanced: All three of the proficient level criteria are met PLUS Completed an investment portfolio for at least one additional mentsProficient: All three tasks are accomplished. This is the core of what must be achieved.Determined which investment option(s) would most likely meet the expectations of both clients.Developed an investment portfolio for each client.Presented an investment portfolio for each mentsProgressing: Two of the three proficient level tasks are mentsBeginning: One of the three proficient level tasks is accomplished. Team should arrange to redo mentsASSESSMENT PROTOTYPESince Mary shops frequently, she likes having easy access to her money, which is being saved at a local bank. Which savings plan did she use? A. Bond investmentB. Certificate of depositC. Savings accountD. Stock investmentANSWER: How much interest is earned on a balance of $1,500 that is compounded semiannually at a 5% interest rate for an account maintained for one year?A. $75B. $78.75C. $75.94D. $175ANSWER: Proctor & Gamble mailed annual invitations to some stockholders for an upcoming annual meeting to vote on officers. Which type of stock do the stockholders own?A. BondB. ETFC. Common StockD. Preferred StockANSWER: An article identified the top 100 companies whose yield for stock investment is rising. Which evaluation factor for investing would this information be useful?A. LiquidityB. Potential returnC. Safety and riskD. TaxesANSWER: ................
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