Part I



Part I - Investing & Investments: Basics Name: Date:1 Unexpectedly, you win $2500 in a raffle. You don’t need the cash right now, so you decide to invest it. How would you invest the money? Explain why. 2 READ: 25 Investing Basics. What are 3 things that surprised you? What are 3 things you want to know more about? 3Saving, Investing, and SpeculatingThis video explains the difference between saving, investing, and speculating. Watch the video and then answer the following questions. 1. Explain the relationship between risk and return. 2. If someone wants to begin setting aside money for a young child’s college tuition, should they save, invest, or speculate? Why?3. If somebody wants to move out of their apartment and buy a house as soon as they can, should they save, invest, or speculate? Why? 4Read the Roadmap to Saving and Investing. What are the nine topics according to this article?1. 2. 3. 4. 5. 6. 7. 8. 9. Which of the 9 topics above will you do? 5Compound Interest Explained: This video explains how compound interest can help you get ahead, whether you’re saving or investing. Why do you earn more money using compound interest than you would using simple interest? Does compound interest have more of an impact for short-term investments or long-term investments? Why? 6 Compound Interest in Various Scenarios Use the Compound Interest Calculator to answer the questions below. Use the compound interest calculator to answer each of the questions below. ?Hint: ?the principal will be the same as the amount saved each month (the first time it is saved is the “Current Principal” and each time after that is a “Monthly Addition”). For simplicity’s sake, leave the compound interest set to 1 time per year. Round all monetary answers to the nearest whole dollar. ????Raul is a saver. ?He sets aside $200 per month during his career of 40 years to prepare for a comfortable retirement. ?He does not like the idea of investing so he puts his money in a savings account which earns 2% interest per year. ?What is the balance of his retirement account after 40 years? Pamela is also a saver. ?She sets aside $200 per month during her 40 year career. ?She invests in the US stock market* through an index fund that averages a 7% return over this 40 year period. ?How much is her retirement account worth?3. Isaiah reads articles about the insufficient savings of those in retirement and decides he needs to start saving now, even though he’s in his 50s. ?He saves $500 per month for 15 years and earns 7% by investing in the stock market* through an index fund. ?What is the value of his retirement account after 15 years? ?7View the following and answer the questions below: What is Inflation? & The Impact of Inflation on Savings If you look at average interest rates on savings accounts today, how do they compare with inflation?Explain why investing in some riskier options is necessary if you want to grow your money substantially for the future.8 ANALYZE: Understanding Inflation Saving money in a bank account that earns less in interest (ex: 0.75%) than the economy experiences inflation (avg: 3%) leaving you with less spending power in the future. If you save $500 in a savings account now, you’ll be able to buy LESS with it in 2025 than you could today. That’s what makes INVESTING an important part of your long-term financial health. ?Let’s explore inflation a little further using this Inflation Calculator.Suppose you are saving money to purchase a car for $2,000. From each paycheck of your after school job, you’re able to save $50 toward the car. You get paid twice a month. How many months will it take you to save enough money to buy that car?How will inflation impact your ability to buy the car? Explain.You’re thinking $2,000 is a lot of money for a high school student, and you understand that, due to inflation, an equivalent car would have cost less than $2,000 in the past. Use the calculator to determine how much the same jacket, had it been available, would have cost the year you were born.9Investing 101: Types of InvestmentsRead this article on 4 different types of investment categories. Then, enter an H for “high,” an M for “medium,” or an L for “low” to describe each investment type’s ranking in each category. RiskReturnInvestment Knowledge NeededBondsStocksMutual FundsAlternative Investments10Growth of $1: 1926 - 2011: Review this line graph and answer the questions below. In one sentence, describe what this graph is illustrating.If you were investing $1 in 1926, what would the most profitable investment path over time have been? Does this surprise you? Why or why not? What investment barely kept up with the rate of inflation?What is a Treasury Bill – “T-Bill”? Why do you think someone would purchase one? Risk and the Risk PyramidBegin reading this article at the section “Determining Your Risk Preference.” In your current situation, which is a bigger concern for you -- time horizon or bankroll? Why? After reading the section on the risk pyramid, how would you describe the concept of “diversifying your investments?” Note: The summit of the risk pyramid includes items such as options, futures, and collectibles. These are high risk alternative investments that require a lot of knowledge or experience to do well; they also require the investor to have time or liquidity to absorb substantial losses. 12 Things to Know About Investing by Age 25Read the article above. What are the three most useful things you learned from this article? Will you use them in your own life? Why or why not?13GLOSSARY | InvestingHere is a glossary of key terms that you will need to know to manage your investments. Complete the “Learn” section and take a screen shot when you are finished and paste it here. 14Key TakeawaysStocks, bonds, and cash savings are the most popular investments. When deciding how to invest, assess your risk profile and time frame. The higher the risk of your investment, the larger your potential return. Compound interest at a rate greater than inflation is the key to making your savings or investments grow over time. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download