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Published byElaine Jordan Modified over 8 years ago
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Money Investments What is an investment? Investment is something bought for future financial benefit. Promotes economic growth Contributes to wealth of a nation ex. Houses Cars Physical capital Human capital
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Money and Investing Financial system - allows the transfer between savers and borrowers. Financial Intermediaries – an institution that helps channel funds from savers to borrowers. They are the link. Can anybody give an example of a financial intermediary? banks, pension funds, credit unions, insurance company’s, finance company’s Mutual Funds
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Money and Investing Financial intermediaries Share risk: Diversification: Mutual Funds: Portfolio’s Provide Information On investments (companies) Prospectus Provide more liquidity Speed to change investment into cash
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Money and Investing Return –amount of money that an investor receives above and beyond the sum that has been invested. Rate of Return – refers to the return stated in a percentage of the total amount invested. Capital gains –difference between the selling price and the purchase price that results in the financial gain of the seller. (per share) Capital losses – difference between the selling price and the purchase price that results in the financial loss of the seller. (per share)
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Do Now Who can give an example of what a financial asset or security is?
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Financial Assets or securities A claim on the property or income of a borrower. Give examples ? Bonds Stocks Options. Homes ownership Loans.
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Types of Markets Capital markets – a market in which money is lent for periods longer than a year Money markets – a market in which money is lent for periods of less than a year
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Types of markets Primary market; a market where newly issued financial assets can be redeemed only by the original holder. Secondary market: a market in which financial assets can be resold.
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What is a bond? Bonds are debt. When you buy a bond you are lending money. Parts of a bond. Coupon – is the interest rate a seller will pay a buyer Maturity – time when a loan is to be repaid. The longer the maturity the larger the risk. Par – amount to be repaid to the investor.
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Do Now? What is an investment? Give examples What is a financial asset ? Give examples What is a financial intermediary? Give examples. What are the four types of markets and how are they different?
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Types of Bonds. U.S. saving bonds Treasury Bonds T Bills – under 1 year T notes 2yr, 3yr, 5yr, 10yr 30 yr. Are the least risky because they are back by the United States Government.
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Municipal bonds Municipal bonds – issued by state and local governments to pay for such things as highways, parks, buildings, and schools. (Munis) Investors do not have to pay state tax on Munis.
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Corporate bonds Bonds sold to help raise money to make businesses bigger. Riskier than government bonds. These bonds are rated by independent companies Standard and Poor and Moody’s are the biggest rating agencies. S&P Moody’s AAA Aaa AA Aa A A BBB Baa BB Ba B B CCC Ca Higher the rating the lower the risk.
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Certificates of Deposit Certificates of Deposit or CD’s. Safe investment, Can’t take money out until the maturity.
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Do now Does a bond with a maturity date that is two years away more or less risky than a bond that has a maturity that is 10 years away? Comparatively a bond with which rating will pay the highest interest rate and why? AAA BBB CCC
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Junk bonds/ High Yield Junk bonds are high risk and possibly high yield. They are not investment grade Anything below BBB Baa
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The Stock Market Stocks are certificates that signifies percentage ownership within a company. Ex. Under Armour (UA) Market cap Last trade 52 week high and low http://finance.yahoo.com/q?s=ua&ql=1 http://finance.yahoo.com/q?s=ua&ql=1
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Where are stock bought and sold? Where are stocks bought and sold Stock Exchanges – market where stocks are bought and sold. Does anybody know two exchanges that based in New York? New York Stock exchange (NYSE) Nasdaq Brokers and Brokerage firms buy and sell stock for investors.
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The Stock Market All holders of stock have a say in the company. The holders of the majority of stock in the company can make the decisions for the company http://www.youtube.com/watch?v=Kc2_jIB2jyA &feature=related http://www.youtube.com/watch?v=Kc2_jIB2jyA &feature=related http://www.youtube.com/watch?v=Kc2_jIB2jyA &feature=related
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Do Now? 1.What is a share of stock? 2.Where can u buy shares? 3.From whom can you buy shares? 4.Why do company’s go public? (IPO) 5.How are risk, liquidity, and return related?
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Why do Companies Issue Stock? It is a way for Companies to raise money for a project without going into debt.
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Common Vs. preferred stock Preferred stock owners No voting rights Bankrupt collect before common shareholders Pay dividends Common Stock Voting rights for officers Have say in company policy
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Do now 1.Why do companies sell IPO’s? 2.What is the difference between a common stock and preferred stock? 3.What do the ratings of a bond tell us about that bond?
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Income vs. Growth stocks Income stocks Give extra income Pay dividends http://finance.yahoo.com/q?s=gs&ql=1 http://finance.yahoo.com/q?s=gs&ql=1 Growth Use income to build business Grow in value over time http://finance.yahoo.com/q?s=ua&ql=1 http://finance.yahoo.com/q?s=ua&ql=1
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Options and Futures Futures are contracts to buy or sell commodities or financial assets in the future at a price set today. Options give a holder of a stock the right to buy or sell stock at a set price or a set period of time. Call option - right to buy Call option - right to buy Call option - right to buy Put option - right to sell Put option - right to sell Put option - right to sell
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Bears vs. Bulls Bears - feel the market and the economy is slowing. Cautious investors Market is falling Bulls – feel the market and economy are strong. Will purchase stocks
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How to track the market Dow Jones industrial average 30 top industrial stocks on the NYSE The S&P 500 or Standard and Poor’s 500 Tracks the 500 stocks on both the NYSE and the NASDAQ.
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Company’s in the Dow http://money.cnn.com/data/markets/dow/ http://money.cnn.com/data/markets/dow/
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TRACKING Individual STOCKS 52 WEEK HIGHS AND LOWS. MANY PERIODICALS TRACK 52 WEEK HIGHS AND LOWS FOR THE NYSE AND THE NASDAQ IT IS THE HIGH AND LOW CLOSING PRICE FOR THE LAST 52 WEEKS.
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Round up What is a difference between a future and option? Why would an investor want to diversify? Can you sell a stock without owning it?
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