1. Ch. 12 Notes: Financial Investments – making your money grow

2. I.Financial Assets A. 3 ways grow your money without risk 1. Savings account (<1%) 2. Certificate of Deposit (C.D.) = savings account you must leave in bank for a certain time (1-2%)

3. 3. Bonds > gov borrows money from you and pay you back with interest(3-5%). a. 3 parts of a bond: 1. Coupon > interest rate. 2. Maturity > when you get the money 3. Par value > amount you will get

4. B. 2 Types of Bonds 1. “EE” bonds > buy for $50 and redeem it when interest turns it into $100 2. “I” bonds > buy $100 for $100 and earn interest on it.

5. II. Definitions A. Mutual Fund = when a bunch of people put their money in a pot and have financial experts buy and sell a bunch of stocks for them. B. Saving = when you are not spending Savings = money you did not spend

6. III. 4 Ways to save for retirement : A. 401k = you and your employer contribute.Get one time payment at retirement. B. Pension = you and your employer contribute. Get monthly payment for life C. Social Security = retirement account you, your employer, and gov contribute. Get monthly payment for life D. IRA = retirement account you contribute. Can get one time or monthly payment at retirement

7. IV. 3 Ways to grow your money with risk… A. Precious Metals…Gold (5%) B. Property (6%) Bought 2002 = 220,000 Sold 2007 = 500,000 made = 280,000 Bought 2007 = 750,000 put down = 150,000 borrowed = 550,000 kept = 130,000 Sold 2012 = 590,000 made = 20,000 Bought 2012 = 470,000 put down = 60,000 borrowed = 410,000 now worth = 620,000 * so far, cleared $90,000 cash and have $210,000 “equity” in house.

8. C. Stocks (10%) 1. 2 places to buy stocks a. NYSE > place where people buy and sell stocks. b. Nasdaq > where people buy and sell stocks electronically. No actual location.

9. 3. 3 Different ways to buy stocks a. Spot purchase > buy stocks now, at current price. Most common. b. Futures purchase > buy stocks at a future date at today’s price. Like layaway. c. Options purchase > like futures, but you have the option of backing out later if you pay a non- refundable fee now.

10. 2. 3 popular summaries of how the stock market performs daily. a. Dow Jones > measures 30 biggest stocks from NYSE. b.S&P 500 > measures 500 biggest stocks c. Nasdaq Composite > measures biggest tech stocks

11. V. Ch. 12 Qs 1. What is a financial Intermediary?(p.315) 2. What is the circular flow of funds? 3. 5 examples of financial intermediaries? a. b. c. d. e. 4. 5 basic investment considerations (list and define) a. b. c. d. e. 5. Define primary market (ex. Bonds) Define secondary market ( ex. Stocks)

12. 6. Another word for stocks is ________ 7. EMH states stocks are always…… 8. buying different stocks is called ______ __________ and helps protect your money. 9.Selling a stock is called a _____ option 10. Buying a stock is called a _____ option