Personal Finance I.Risk II.Diversification III.Why You Can’t Beat the Market: The Efficient Market Hypothesis IV.Compounding October 23

$8,000 Homebuyer Tax Credit (Total Cost = $16 billion) IRS has audited 100,000 of 1.4 million applications IRS has audited 100,000 of 1.4 million applications 74,000 claim credit even though they already own the house 74,000 claim credit even though they already own the house 12,000 claimed residential energy credit in past 3 years 12,000 claimed residential energy credit in past 3 years 19,000 claimed the credit but did not own a house 19,000 claimed the credit but did not own a house 600 credits were claimed by children—including a 4 year old 600 credits were claimed by children—including a 4 year old Projection by Brookings Institution Projection by Brookings Institution 85% of people expected to claim the credit would have bought a house anyway 85% of people expected to claim the credit would have bought a house anyway Source: Tax Policy Center

Social Security Trust Fund: $2.2 trillion (12/08) Social Security Trust Fund: $2.2 trillion (12/08)Trust FundTrust Fund

Real Returns and Risk Average Return (%/Year) Risk (std. dev.) U.S. Treasury Bills0.8%0.2 Long-Term Corporate Bonds 2.8%5.6 Small Company Stocks9.5%30.2

Uninsured by Age 2008 Percent Uninsured Under 189.9% % % % % % Total Population15.4%

How much will you have if you earn $30,000 and get a 9% real return? 1.At age 22, save $3,000/year for 10 years $1.1 million 2.At age 32, save $3,000/year for 20 years $665,000 3.At age 22, save $3,000/year for working life $1.9 million 4.At age 22, save 10% of income/year for working life $2.1 million (your savings total $220,000)

How Do Economics Majors Compare? Source: Spring 2008 Salary Survey Curriculum Description Average Starting Salary Accounting$42,104 Art$28,479 Business/Marketing$35,838 Chemistry$41,638 Computer Programming$46,775 Economics$43,419 Elementary Teacher Ed.$30,497 Engineering$49,707 Finance$38,024 Foreign Languages$34,049 History$34,257 Philosophy$28,234 Psychology$32,188 Sociology$33,858