1. Agenda Warren Buffet’s Billion Challenge Test #1 Returned Personal Finance Stocks Loans / Credit cards Chapter 34 Highlights HOMEWORK Read Chapter 6 Questions 1, 6 Problems 4 (not c), 5

2. Warren’s $1,000,000,000 challenge http://abcnews.go.com/Sports/warren- buffett-backs-billion-dollar-march- madness- challenge/story?id=21615743 What is the current value of forty $25 million annual payments if inflation is 3%

3. Net Present Value Current Value of Future Equal Cashflows NPV = R x (1 – (1 / 1 + i) n ) / i R - cash received each period i - inflation rate, n - number of periods

4. Payout NPV = (1 – (1 / 1 + i) n ) / i NPV = $25M x (1 – (1 / 1 +.03) 40 ) /.03 = $25M x (1 – (1/3.26)) /.03 = $25M x (1-.3067) /.03 = $25M x.6933 /.03 = $25M x 23.11 $577,750,000* * About half of the billion advertised. Highlights the corrosive effect of even slight (3%) inflation

5. Test #1 Returned

6. Stocks What is a stock? Stock Charts Why invest in stocks?

7. Stocks What is a stock? Partial ownership (a share, get it?) of a company Gives you Claim on earnings (dividend) Right to sell the share (the asset) Voting rights

8. Stocks Stock Charts Bigcharts.com

9. Stocks Why invest in stocks? High returns vs. other assets Liquid (you can sell easily)

10. So how do I buy stocks? Looks hard but even a baby can do it! http://search.yahoo.com/search?p=etrade+baby+buys+stcosk&ei=UTF-8&fr=moz35

11. Why buy stocks? And save for retirement! https://www.youtube.com/watch?v=pa1ejCoJiWk

12. THREE MINUTE BREAK

13. Stock Indexes Collection of stocks Barometer of stock market in general Most Common: Dow Jones S&P 500 NASDAQ Dow Jones most common of these It’s what they’re talking about when they say “The stock market is up 50 points”

14. Loans and Credit Cards O wait! A Credit Card is a loan! Loans for lots of things Auto, College, House (mortgage), Boat, whatever. Debit card vs. Credit Card

15. Highlights of Chapter 34 The most powerful force in the universe is compound interest. Al Einstein

16. Highlights of Chapter 34 Risk and Return High Return means high risk If it sounds too good to be true, it is. There’s a sucker born every minute. P.T. Barnum

17. HOMEWORK Read Chapter 6 Questions 1, 6 Problems 4 (not c), 5