1. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Exam Next Week ●Study now ●Do WebStudy quiz for class after exam. 1-1

2. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-2 Financing and Investing

3. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-3 Financial Pages ●Cash instruments –normally just show interest rates –Annual Percentage Rate  compare APRs –CDs will also show term length Source: https://personal.vanguard.com/us/funds/bonds/bonddesk, 7/2/2013 CDs Yield 1 month 3 month 6 month 9 month1 year 18 month2 year3 year5 year7 year10 year New CDs ——0.30%0.35%0.40%0.55%0.80%1.10%1.75%2.25%2.75%

4. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Bond Quotes 1-4 Coupon – the interest rate ‘printed’ on the bond YTM – yield to maturity. The computed rate you get if you hold a bond to maturity Bonds are usually denominated in $1,000 amounts (face (par) value) Price – a percent of the face value Cur Yld – current yield = interest payment / current price Moody, S&P – ratings given by these bond rating companies Source: www.bondpickers.com, 2/27/12

5. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Stock Quotes 1-5 Bid – what a person is willing to pay Ask – what a person wants for the stock Market Cap – Value of the company = price x (# shares) P/E – Price/earnings ratio = price / EPS The higher the P/E, the more the market thinks the company’s profits will grow EPS – earnings per share, the profit on one share of stock = net income / # shares Div – dividend paid per share of stock ( N/A means no dividends are paid ) Yield – dividend / price. ( N/A means no dividends are paid ) Source: finance/yahoo.com, 2/23/12

6. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-6 Equities ●P/E ratio –ratio of price to earnings –a common comparison of stocks and markets  high P/E means expect growth ●Dividends –Growth / Income tradeoff  What would be your corporate policy, why? –Affects taxes for investors  how? –Yield = dividend / price

7. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-7 Stock Indexes ●Reflect the general activity of the stock market ●Most common indices –Dow Jones Industrial Average (the Dow or DJIA), –Standard & Poor’s 500 (S&P 500), –NASDAQ composite ●Foreign indices – DAX (Germany) – FTSE, FT-100 or “Footsie” (London), – Nikkei (Tokyo)

8. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-8 Mutual Funds ●Mutual Funds –Investors pool their money to buy investments –Investors become part owners of a large number of securities, –lessen their individual risk ●Index funds / Managed Funds ●Load / No Load Funds

9. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Mutual Fund Quotes 1-9 NAV – net asset value, i.e. the price Net assets – amount invested in the fund Yield – dividends paid / mutual fund share price Source: finance/yahool.com, 2/23/12

10. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-10 Discussion ●Efficient markets –markets reflect the collective wisdom of all investors –can you beat the market?  what do you know that people who have millions or billions at stake do not?  index funds –why are ethics important in this context?

11. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. In-Class ●Watch CNBC –Understand the ticker –Understand the indexes –Listen and understand the discussion ●Look at –bloomberg.com –cnbc.com 1-11