1 Sources of Capital SECTION 1: Saving SECTION 2: Investing SECTION 3: Stocks, Bonds, and Futures SECTION 4: Borrowing and Credit CHAPTER 9

2 Benefits of saving money: security interest Saving SECTION 1

3 Difference between savings accounts and time deposits: Savings accounts  offer liquidity  have variable interest rates Time deposits  require the saver to leave money in the account for a specific amount of time  offer higher and fixed interest rates  offer reduced liquidity Saving SECTION 1

4 Economists measure savings by calculating the savings rate, or the percentage of people’s unspent disposable income. Saving SECTION 1

5 Goals and elements of a personal financial plan: spending and saving plan—to create a personal budget investment plan—to put money to work retirement plan—to save and invest money for retirement estate plan—to allow the transfer of a person’s property after death Investing SECTION 2

6 Difference between financial investment and real investment: financial investment—exchanging property ownership and payments to make a profit real investment—using money to create new capital goods Investing SECTION 2

7 Real investment affects economic growth by increasing the number of capital goods used by producers. Investing SECTION 2

8 Why and how people invest in stocks: to gain profit to limit the risk on their investments to become a part owner of a corporation How to invest in stock: buy from a broker buy from an investment bank Stocks, Bonds, and Futures SECTION 3

9 Factors that influence stock prices: corporate finances investor expectations external forces, such as changes in the economy or international events Stocks, Bonds, and Futures SECTION 3

10 Corporate and government bonds offer lower interest than stock dividends offer less risk than stock Stocks, Bonds, and Futures SECTION 3

11 Advantages of futures: high profit potential guarantee that original purchase price of the futures will be honored Disadvantages of futures: high risk requires specialized knowledge about commodities being bought or sold Stocks, Bonds, and Futures SECTION 3

12 Ways lenders make money on loans: interest repossession Borrowing and Credit SECTION 4

13 Factors that influence a credit rating: ability to pay number of assets owned credit history Borrowing and Credit SECTION 4

14 Benefits of credit to the economy: stimulates growth promotes stability Borrowing and Credit SECTION 4