Do Now Activity: If you were old enough to play and win the Powerball Jackpot, what would you do with the money? How would you allocate your funds? JClarke
OBJECTIVES: Describe how investing contributes to the free enterprise system. Explain how the financial system brings together savers and borrowers. Describe the characteristics of other types of financial assets. JClarke
Chapter 11 Financial Markets JClarke
Section 1 Saving and Investing JClarke
“Better safe than sorry!” “Nothing ventured, nothing gained!” “Don’t put all of your eggs in one basket!” “Look before you leap!” JClarke
Why is studying for a test a type of investment? JClarke
I. Investment Act of redirecting resources from being consumed today, so that they may create benefits in the future. JClarke
II. Investing & Free Enterprise Investing is essential to the free enterprise system. Promotes economic growth and wealth. JClarke
Banks lend the funds to businesses. A. How does it work? People deposit their money in a savings account in a bank. Banks lend the funds to businesses. Businesses invest in new capital to make their businesses better.(products/jobs) JClarke
III. The Financial System Network of structures and mechanics that allows transfers of money between savers and borrowers. JClarke
A. Financial Assets Claims on the property or income of a borrower. When savers save, they obtain these documents (passbooks, monthly statements, certificates, etc.)as proof of their deposits. JClarke
B. Flow of Savings & Investments JClarke
IV. Financial Intermediaries Saver and borrowers are linked through a variety of financial institutions. They help channel funding between savers and borrowers. JClarke
A. Financial Intermediaries Banks, savings & loan associations, credit unions & finance companies (take deposits & lend money) Mutual Funds (pools money of many investors) Hedge Funds (private investment/risky/wealthy) Life insurance (lend part of premiums collect) Pension Funds (Retirement income) JClarke
Financial Intermediaries JClarke
A business that gets a business loan? Saver or Borrower: Person who purchases a CD? A business that gets a business loan? JClarke