2. Which would you do? Take $1,000 today. OR Take 1¢ that will double each day for 30 days?

3. Here’s the Answer Day 1.02 Day 2.04 Day 3.08 Day 4.16 Day 5.32 Day 6.64 Day 71.28 Day 82.56 Day 9 5.12 Day 1010.24 Day 1120.48 Day 1241.00 Day 1382.00 Day 14 164.00 Day 15 328.00 Day 16 655.00 Day 17 1311.00 Day 18 2,621.00

4. at the end of 30 days... $10,737,422

5. SAVINGS & INVESTMENT Ag Business Management Spring 1999

6. Objectives List the reasons for savings & investment. Compare characteristics of various types of investments. Explain the concept of interest. Describe how investments can grow in value and calculate the future value of money.

7. Reasons for Savings Accounts Retirement Down payments Business start up Education

8. Types of personal investments Personal loans -- not liquid/very risky Saving acct. -- liquid/no risk Certificate of deposit -- liquid when due/no risk Money market acct. -- liquid/minimal risk Real estate -- not liquid/risky Appreciable asset -- not very liquid/risky

9. Treasury Bills Liquid when due/not risky Short-term Maximum maturity = 1 year Minimum investment = $10,000

10. Treasury Notes Liquid when due/not risky minimum $5,000 investment 3 years or less minimum $1,000 investment 4 - 10 years

11. Treasury Bonds Liquid when due/not risky semi-annual interest $1,000 minimum investment 10-30 years

12. Municipal Bonds Liquid when due/not risky Issued by state, city, school Maturity ranges from 1 - 40 years Semi-annual interest Interest is tax exempt Minimum $5,000

13. Mutual Funds Semi-liquid/semi-risky Pool of money from many individuals Invested by professional money manager –equity funds - stock/industry, public utilities –fixed-income - corporate securities, gov agen –Balanced -combination of stocks & bonds

14. Other Investments Annuity -- some liquid; some not/low risk –tax deferred Precious metals -- not liquid/risky –buy & sell at market value & possession taken Stock market -- semi-liquid/risky –returns to investors –dividends –capital gains/losses -- sale of stock

15. Time Value of Money P = principle, i = interest, n = years Future value (Compounding) –FV = P(1+I) n Present value (Discounting) –PB = P[1/(1+i) n ]