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CHAPTER 19 SLIDE 1 CHAPTER 19 Savings and Investment Strategies 19 -1 Saving and CHAPTER 19 SLIDE 1 CHAPTER 19 Savings and Investment Strategies 19 -1 Saving and Investment Planning 19 -2 Stock Investments 19 -3 Bonds and Mutual Funds 19 -4 Real Estate Investments 19 -5 Other Investments © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

SAVING AND INVESTMENT BASICS CHAPTER 19 SLIDE 2 ● Savings and investment activities ● SAVING AND INVESTMENT BASICS CHAPTER 19 SLIDE 2 ● Savings and investment activities ● 10% of each paycheck for savings ● Investing means using your money to make more money ● Time Value of Money PV = FV x [ 1 ÷ (1 + i)n ] ● PV = Present value ● FV = Future Value ● i = interest ● n = time © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

SAVING AND INVESTMENT BASICS ● TVM Example ● ● ● CHAPTER 19 SLIDE 3 SAVING AND INVESTMENT BASICS ● TVM Example ● ● ● CHAPTER 19 SLIDE 3 FV = 100 i = 8% n = 2 PV = FV x [ 1 ÷ (1 + i)n ] PV = 100 x [ 1 ÷ (1 +. 08)2 ] PV = 100 x [ 1 ÷ 1. 1664] PV = 100 x [. 08573388] PV = $85. 73 ● The growth of savings ● Interest ● Compound interest © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER SAVING AND INVESTMENT CHOICES ● Savings plans ● Savings account ● Certificate of CHAPTER SAVING AND INVESTMENT CHOICES ● Savings plans ● Savings account ● Certificate of deposit ● Money market account ● Large amounts ● Int. is paid on corporate & Gov. securities ● Stock investments ● You buy a share of company 19 SLIDE 4 ● Bond investments ● Lending money to Gov. or business to use ● Mutual funds ● Invest in a variety of securities ● Alternative investments ● Real estate ● Commodities ● Grain, Livestock, precious metals ● Collectibles © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

EVALUATING SAVINGS AND INVESTMENTS CHAPTER 19 SLIDE 5 ● Safety and risk ● Up EVALUATING SAVINGS AND INVESTMENTS CHAPTER 19 SLIDE 5 ● Safety and risk ● Up to $250, 000 now ● Potential return ● Yield is the % of money earned on your savings or investment ● Liquidity ● Investments that can be turned into cash quickly ● Taxes ● Earning from savings & investments are taxed. So if you make $100 and are taxed 20% you have only earned $80 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER INVESTMENT PYRAMID © 2012 Cengage Learning. All Rights Reserved. 19 SLIDE 6 Principles CHAPTER INVESTMENT PYRAMID © 2012 Cengage Learning. All Rights Reserved. 19 SLIDE 6 Principles of Business, 8 e

CHAPTER 19 SLIDE 7 TYPES OF STOCK ● Preferred stock ● Has priority over CHAPTER 19 SLIDE 7 TYPES OF STOCK ● Preferred stock ● Has priority over common ● No voting rights ● Get paid before common stock holders ● Common stock ● General ownership ● Could get paid more then preferred ● Example company issues $100, 000 dividend stock with 6% rate. Company makes $20, 000. Preferred gets $6, 000 (100, 000 X. 06) and Common gets $14, 000 ($20, 000 -$6, 000) ● But what if instead 6% it was 20% © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 19 SLIDE 8 STOCK TRANSACTIONS ● Using a stockbroker ● Full-service broker: work CHAPTER 19 SLIDE 8 STOCK TRANSACTIONS ● Using a stockbroker ● Full-service broker: work for large brokerage houses and research stocks ● Discount Broker: just places orders and offers limited research ● Online investing ● Etrade © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER STOCK TRANSACTIONS 19 SLIDE 9 ● Stock exchanges ● Business organization that accommodates CHAPTER STOCK TRANSACTIONS 19 SLIDE 9 ● Stock exchanges ● Business organization that accommodates buying & Selling securities ● NYSE, American Stock Exchange, Chicago, Boston, more than 170 around world ● Smaller companies not traded on stock exchange but over the counter OTC. Example is our NASDAQ National Association of Security Dealers Automated Quotations ● Changing stock values ● Market Value is the price at which a share of stock can be bought and sold in the stock market ● Stock index Dow Jones & Standard & Poor’s (S&P) larger companies © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

STOCK MARKET PRICE REPORT © 2012 Cengage Learning. All Rights Reserved. CHAPTER 19 SLIDE STOCK MARKET PRICE REPORT © 2012 Cengage Learning. All Rights Reserved. CHAPTER 19 SLIDE 10 Principles of Business, 8 e

CHAPTER 19 SLIDE 11 Checkpoint ● What is the purpose of a stock exchange? CHAPTER 19 SLIDE 11 Checkpoint ● What is the purpose of a stock exchange? ● The purpose of a stock exchange is to accommodate the buying and selling of securities. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 19 SLIDE 12 STOCK SELECTION ● Stock information sources ● S&P, Dow Jones, CHAPTER 19 SLIDE 12 STOCK SELECTION ● Stock information sources ● S&P, Dow Jones, Moody’s handbook of Common Stock, ● U. S. Securities & Exchange (SEC). Require businesses to report detailed reports. ● Economic factors ● ● Inflation Interest rates Consumer spending Employment © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER STOCK SELECTION 19 SLIDE 13 ● Company factors ● ● ● Has it CHAPTER STOCK SELECTION 19 SLIDE 13 ● Company factors ● ● ● Has it been profitable Good business decisions Growth potential Large amount of debts Compare to others in industry Yield ● Example if paying $0. 60 a share quarterly that would be $2. 40 a year. If stock was selling at $40 then ● Dividend per share/Market price per share $2. 40/40 =. 06 or 6% © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 19 SLIDE 14 GOVERNMENT BONDS ● Municipal bonds ● Bonds issued by local CHAPTER 19 SLIDE 14 GOVERNMENT BONDS ● Municipal bonds ● Bonds issued by local & state governments ● New park ● U. S. savings bonds ● Series EE bought a ½ is value. A $50 bond costs $25 ● I bond purchased at face value © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER GOVERNMENT BONDS 19 SLIDE 15 ● Other federal securities ● Federal notes (T-notes) CHAPTER GOVERNMENT BONDS 19 SLIDE 15 ● Other federal securities ● Federal notes (T-notes) ● 1 -10 years ● Treasury bills (T-bills) ● 90 days ● Treasury bonds (T-bonds) ● 30 years © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 19 SLIDE 16 CORPORATE BONDS ● Bond components ● Face value/maturity value amount CHAPTER 19 SLIDE 16 CORPORATE BONDS ● Bond components ● Face value/maturity value amount borrowed ● Bond values ● Depends on market value of bond and the changing interests rates © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER MUTUAL FUNDS 19 SLIDE 17 ● A mutual fund is an investment fund CHAPTER MUTUAL FUNDS 19 SLIDE 17 ● A mutual fund is an investment fund set up and managed by companies that receive money from many investors. ● Aggressive-growth stock funds ● High risk, quick growth ● Income funds ● Pay regular dividens © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER TYPES OF MUTUAL FUNDS 19 SLIDE 18 ● International funds ● Companies around CHAPTER TYPES OF MUTUAL FUNDS 19 SLIDE 18 ● International funds ● Companies around the world ● Sector funds ● Same industry such as health care, energy ● Bond funds ● Corporate bonds ● Balanced funds ● Both stocks & bonds © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER MUTUAL FUND VALUES 19 SLIDE 19 ● Shares of the mutual fund ● CHAPTER MUTUAL FUND VALUES 19 SLIDE 19 ● Shares of the mutual fund ● Value of each share ● Net asset value (NAV) ● Worth $400, 000 & 80, 000 shares ● $400, 000 / 80, 000 = $5 (NAV) ● Operating expenses ● Earnings © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER SELECTING HOUSING 19 SLIDE 20 ● Renting your residence ● Owning a mobile CHAPTER SELECTING HOUSING 19 SLIDE 20 ● Renting your residence ● Owning a mobile home ● Buying a home (mortgage) ● Services of real estate agents ● Other real estate professionals (appraiser) ● Buying a condominium © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

BENEFITS OF HOME OWNERSHIP CHAPTER 19 SLIDE 21 ● Tax benefits ● Interest paid BENEFITS OF HOME OWNERSHIP CHAPTER 19 SLIDE 21 ● Tax benefits ● Interest paid on mortgage ● Property Taxes ● Increased equity ● Equity difference between price you could sell your house vs. amount you still owe © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

COSTS OF HOME OWNERSHIP CHAPTER 19 SLIDE 22 ● Property taxes ● Interest payments COSTS OF HOME OWNERSHIP CHAPTER 19 SLIDE 22 ● Property taxes ● Interest payments ● Property insurance ● Maintenance © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER COMMODITIES AND FUTURES 19 SLIDE 23 ● Commodity exchanges ● Agricultural commodities ● CHAPTER COMMODITIES AND FUTURES 19 SLIDE 23 ● Commodity exchanges ● Agricultural commodities ● Gold, silver, and precious metals ● Currency and financial instruments © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER COLLECTIBLES 19 SLIDE 24 ● Types of collectibles ● Collectible values © 2012 CHAPTER COLLECTIBLES 19 SLIDE 24 ● Types of collectibles ● Collectible values © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e