Unit 3 - Investing: Making Money Work for You

Savings and Investments Unique Savings Features Unique Investment Features Common Features What are some features common to both investments and savings? 3-A

Investing Weekly at 5% Interest Amount Saved Per Week Value After 10 Years $ 7.00 $ 4,720 $ 14.00 $ 9,440 $ 21.00 $ 14,160 $ 28.00 $ 18,880 $ 35.00 $ 23,600 3-B 1

Investing Annually to Achieve a Goal Value of $20 1 Year 2 Years 4 Years 6 Years 4% $20.80 $21.63 $23.40 $25.31 5% $21.00 $22.05 $24.31 $26.80 Building…. 6% $21.20 $22.47 $25.25 $28.37 8% $21.60 $23.33 $27.21 $31.74 10% $22.00 $24.20 $29.28 $35.43 3-C 1 2 3 4 5

* Assumes a 365-day year for daily amounts To Have $50,000 at 8% Interest Number of Years Saving Monthly Amount Daily Amount* 6 $543.33 $17.79 4 $887.31 $29.06 Assumes a 365 day year for the daily amounts. 2 $1,928.03 $63.17 * Assumes a 365-day year for daily amounts 3-D 1 2 3

Investing a $10,000 Lump Sum 5% $12,763 $16,289 $20,789 $26,533 6% Interest Rate 5 Years 10 Years 15 Years 20 Years 5% $12,763 $16,289 $20,789 $26,533 6% $13,382 $17,908 $23,966 $32.071 7% $14,026 $19,672 $27,590 $38,697 8% $14,693 $21,589 $31,722 $46,610 9% $15,386 $23,674 $36,425 $56,044 5 years at 5% 12,763 10% $16,105 $25,937 $41,772 $67,275 11% $16,851 $28,394 $47,846 $80,623 12% $17,623 $31,058 $54,736 $96,463 3-E 1

Investing $1,000 Annually 5% $5,526 $12,578 $21,579 $33,066 6% $5,637 Interest Rate 5 Years 10 Years 15 Years 20 Years 5% $5,526 $12,578 $21,579 $33,066 6% $5,637 $13,181 $23,276 $36,786 7% $5,751 $13,816 $25,129 $40,995 8% $5,867 $14,487 $27,152 $45,762 9% $5,985 $15,193 $29,361 $51,160 10% $6,105 $15,937 $31,772 $57,275 11% $6,228 $16,722 $34,405 $64,203 12% $6,353 $17,549 $37,280 $72,052 3-F 1

Answers to Exercise 3B ? ? ? ? ? ? 4% $10.40 $10.82 $11.70 $12.65 8% Interest Rate 1 Year 2 Years 4 Years 6 Years 4% $10.40 $10.82 $11.70 $12.65 ? ? 8% $10.80 $11.66 $13.60 $15.87 ? ? ? ? 3-G 1 2 3 4 5 6

Rule of 72 72 = 72 = Years Needed to Double Investment Interest Rate Required = Years Needed to Double Investment 3-H

Rule of 72: $10,000 Invested INTEREST RATE Year 3% 6% 12% 6 $20,000 12 $40,000 18 $80,000 24 $20,000 $40,000 $160,000 3-I

Financial Planning Pyramid NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You Penny Stock Commo- dities Collectibles Speculative Stock / Bonds / Mutual Funds Real Estate Blue-Chip Common Growth Mutual Funds High-Grade Convertible Bonds Preferred Balanced Corporate Bonds or Mutual Funds Municipal Bonds Money Market Accounts Certificates of Deposit U.S. Savings Insured Savings / Checking Accounts Treasury Issues Financial Planning Pyramid Highest Risk Highest Earnings Lower Risk Lower Earnings 3-J

The Impact of Higher Returns on Savings and Investments Rule of 72: The approximate frequency with which $100 doubles at specific interest rates Interest Rate 6 Yrs. 9 Yrs. 12 Yrs. 18 Yrs. 24 Yrs. 3% $200 4% $200 6% $200 $400 8% $200 $400 12% $200 $400 $800 3-K 1 2

Dollar-Cost Averaging One-Time Investment Dollar-Cost Averaging Amount Invested Share Price ($) Shares Purchased Amount Invested Share Price ($) Shares Purchased $1,000.00 $20.00 50.00 $100.00 $20.00 5.00 $100.00 $19.50 5.13 $100.00 $19.25 5.19 $100.00 $19.75 5.06 $100.00 $19.20 5.21 $100.00 $18.90 5.29 100/19.78 = 5.06 shares, not 5.08 (second to last row on the right) Total shares purchased then becomes 51.66, not 51.68 $100.00 $18.00 5.56 $100.00 $18.60 5.38 $100.00 $19.78 5.06 $100.00 $20.90 4.78 $1,000.00 $20.00 50.00 $1,000.00 $19.39* 51.66 3-L * Average Share Price 1 2 3 4