1. Bell Ringer
“It seems to be a law of nature, inflexible and inexorable, that those who will not risk cannot win.” John Paul Jones
What does the quote mean?
Restate the quote in your own words.
When was a time when this quote applied to your life?
Draw from personal experience.

2. Objectives Describe the benefits and risks associated with investing.
Identify the four basic types of risk.

3. Introduction What are the benefits and risks of saving and investing?
Savings you deposit in a bank will grow (a little) with almost no risk at all.
Investing, while more risky, may yield a larger return for your initial investment.
It may also prove to be financially devastating if it is ill-timed or mismanaged.

4. Introduction
The simple truth is… you will all invest at some point in your lives.
College
House
Car
Children
Retirement

5. Diversification
Diversification is a risk management technique that spreads out your money across a variety of investments.
“Don’t put all your eggs in one basket!”
Spreading out risk helps prevent losing everything on a bad investment.

6. Liquidity
Liquidity is the ability of property, capital, or investments to be used as or converted into cash.
This determines how easily people can access their money when they need it, depending on how liquid the investment is.

7. Return and Risk
In general, the higher the potential risk, the higher the return.
The lower the potential risk, the lower the return.
Whenever people evaluate their potential investments, they must balance the risks involved with the rewards they expect to gain.

8. Types of Risk
Credit risk  Borrowers may not pay off the money they have borrowed, or they may be late in making payments
Inflation rate risk  Inflation rates erode the value of your assets
Liquidity risk  You may not be able to convert the investment back into cash quickly enough for your needs
Time risk  You may have to pass up other, more profitable investment opportunities… aka, opportunity cost

9. Bell Ringer Why do people need to diversify their investments?
What are the four types of risk?

10. Objectives
Describe the characteristics of bonds as financial assets.
Identify different types of bonds.

11. Bonds
What is a bond?
Bonds are a form of debt investment where an investor loans money to a business or government entity.
They are loans to institutions or to the government, but you serve as the bank.

12. Why are bonds bought and sold?
Bonds as an Investment
Why are bonds bought and sold?
Bonds are sold by governments and/or corporations to finance projects.
They offer a higher rate of return than a savings account, although they are generally a non-risky investment.

13. Components of Bonds Bonds have three basic components:
Coupon rate - the interest rate that a bond issuer will pay to a bondholder
Maturity – when payment to a bondholder is due
Par value - the amount to be paid to the bondholder at maturity

14. Coupon rate – As of April 2016, 0.10%
Maturity – Initial maturity of 20 years; collects interest up to 30 years
Par value – Issued in denominations between $25 and $10,000

15. Advantages and Disadvantages
Once a bond is sold, the coupon rate remains the same. (Stability)
The return for a bond investment is predictable.
Disadvantages
Once a bond is sold, the coupon rate remains the same. (Low returns)
A company/government does not have to share profits with bondholders if it is doing well.

16. Municipal Bonds
State and local governments issue municipal bonds to finance such projects as highways, libraries, parks, and schools.
These are attractive to long-term investments and are relatively safe.
Why are they a safe investment?
Checkpoint Answer: Municipal bonds

17. Corporate and Junk Bonds
Corporate bonds are issued by corporation to help raise money to expand business.
These bonds have a moderate risk level because investors must depend on the corporation’s success.
Junk bonds are bonds with a high risk and a potentially high return.
Investors in junk bonds face a strong possibility that some of the issuing firms will default on their debt.
Why would someone want to buy a junk bond?

18. Key Terms
coupon rate: the interest rate that a bond issuer will pay to the bondholder
maturity: the time at which payment to a bondholder is due
par value: a bond’s stated value, to be paid to the bondholder at maturity

19. Key Terms, cont.
municipal bond: a bond issued by a state or local government or a municipality to finance a public project
corporate bond: a bond issued by a corporation to help raise money for an expansion
junk bond: a bond with high risk and potentially high yield

20. Bell Ringer
If you were given $1,000 to invest in the stock market today, which three companies would you want to buy stock in? Why?

21. Objectives Define what a stock is. Describe how stocks are traded.
Explain how stock performance is measured.
Describe the Great Crash of 1929 and more recent stock market events.

22. Review https://www.youtube.com/watch?v=CN1dh6w54B8
“Stock Market Basics”

23. Review
Stocks, or ownership shares in a company, are traded on a stock exchange.
Investors typically hire stockbrokers to handle these transactions.
The two largest stock exchanges in the world are the NYSE and Nasdaq.

24. Benefits of Buying Stock
The two ways of making money from buying stock are:
Dividends —part of the firm’s profits, usually paid quarterly
Capital gains —selling the stock for more than you paid for it
“Buy low, sell high”
Checkpoint Answer: Through dividends and capital gains.

25. Measuring Stock Performance
When the stock market rises steadily over a period of time it is known as a bull market.
When the stock market falls or stagnates for a significant period it is a bear market.

26. The Great Crash
The U.S. enjoyed a decade-long bull market following World War I.
The market value of all stocks rose from $27 billion in 1925 to $87 billion by late 1929.
Checkpoint Answer: When 16.4 million shares were sold on one day and the stock market crashed.

27. The Great Crash
However, the income was spread unequally throughout society, making the economic growth unsound.
Consumer debt rose exponentially throughout the 1920s. Stock brokers encouraged the practice of buying on margin (making high-risk investments using borrowed money).
By August 1929, nearly 40% of all money loaned in the U.S. was used to buy stocks!
Checkpoint Answer: When 16.4 million shares were sold on one day and the stock market crashed.

28. The Great Crash
The Dow began steadily dropping in September People began to liquidate their shares in a panic, sending the prices of stocks into a free-fall.
On October 29, 1929, a record 16.4 million shares were sold and the market crashed (aka, Black Tuesday).
The NYSE lost $14 billion in investments ($200 billion today)
The Crash led to the Great Depression.
Checkpoint Answer: When 16.4 million shares were sold on one day and the stock market crashed.

29. The Aftermath
For decades after the Great Depression, many people were scared to invest in the stock market.
By the 1980s, with the development of mutual funds (a pool of funds placed in diversified investments and professionally managed), Americans became more comfortable with stock ownership once again.

30. The Stock Market Today
In 2008, the stock market began falling, causing a major economic crisis in the United States once again (aka, The Great Recession).
Although some business sectors are still struggling, the stock market has rebounded and is currently in a bull market.
On November 2, 2017, the DJIA closed at a record high of 23,

31. Key Terms share: a portion of stock
capital gain: the difference between the selling price and purchase price that results in a financial gain for the seller

32. Key Terms, cont.
stockbroker: a person who links buyers and sellers of stock
bull market: a steady rise in the stock market over a period of time
bear market: a steady drop or stagnation in the stock market over a period of time

33. Investing Quiz
1. Spreading out your investments is referred to in economics as ______? 2. Complete the statement: The higher the risk, _______________. 3. True or False: Stockholders are guaranteed a return on their financial investment.

34. Investing Quiz
4. What are stocks? 5. Which of the following is best for investors: Bull Market or Bear Market? 6. True or False: When stockholders sell their stock, the corporation receives the money. 7. What does NYSE stand for?

35. Investing Quiz 8. What are dividends? A capital gain
Part of a company’s profit paid to its owners
The price for which the stock is sold on an exchange
The price for which the stock is sold to investment bankers

36. Investing Quiz 9. One way people earn money from stocks is by
buying stock from an investment banker.
trading the stock back to the company they own shares in.
selling the stock for a lower price than they paid for it.
selling the stock for a higher price than they paid for it.