1. Day 1 – Total and Annual Return
Investment Basics
Day 1 – Total and Annual Return

2. 𝐴−𝑃 𝑃 Total Return 𝑁𝑒𝑤 −𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙
The total percent your money increased
or decreased.
𝐴−𝑃 𝑃
𝑁𝑒𝑤 −𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 OR

3. 𝐴 𝑃 1 𝑌 −1 Annual Return The annual percent your money
increased or decreased.
𝐴 𝑃 1 𝑌 −1

4. Example 1 -
You invest a starting principal of $1000 and it grows to $1500 in 5 years. Calculate the total return and annual return. Interpret each.

5. Example 2 -
You purchased shares in NewWeb.com for $2000. Three years later, you sold them for $1100. What were your total return and annual return on this investment? Interpret each.

6. Investment Considerations
1. Liquidity
Can I access my money?
2. Risk
Will I lose my money?
3. Return
How much money will I get back?

7. Cash Investments Bank accounts
Mostly liquid, least risky, lowest return
Certificates of Deposit (CD’s)
Must be in a certain amount of time
Penalty for early removal
Higher interest rate

8. Cash Investments Individual retirement account (IRA) Long term savings
Least liquid
Highest interest rate
Tax-deductible

9. STOCK Share of ownership in a company Sale may yield gain or loss
Some earn dividends
(portion of the companies profit)

10. BONDS A loan to the government or a company
Issuer pays simple interest to investor
Matures at a set time.