SAVINGS OPTIONS YIELD RANGE IN RECENT YEARS FINANCIAL RISK INFLATION HEDGE LIQUIDITY CHECKING ACCOUNTS % Low risk if insured NoneHigh SAVINGS ACCOUNTS % Low risk if insured NoneHigh CERTIFICATES OF DEPOSIT Time Deposits % Low risk if insured None 1 week to 8 years (penalty for early withdrawal) GOV’T SAVINGS BONDS % Low risk, backed by government None Redemption results in lower yield GOV’T TREASURY BILLS, NOTES AND BONDS % Low risk, if held to maturity, backed by government None Immediate to several years

Stocks Can provide both income and capital gain: Income – If the company declares a dividend of 25¢ per share, and you own 1000 shares of the company, then you would receive dividends of $250 (1000 X.25) Capital Gain – If you buy the stock at $20 per share, and sell it a year later at $30 a share, then you have made $10 a share capital gain ($30-$20), or a gain (profit) of $10,000 if you owned 1000 shares.

Bonds In general, bought only for income potential. Regular Bonds – you purchase for $1,000 each (face value) and agree not to ask for your $1,000 back until 10 years time (the maturity date). During these ten years, the company pays you $80 a year (yield - 8% - of face value). At the maturity date (ten years later), the company returns to you your $1,000 investment. Zero Coupon Bonds – You pay $200 for a $1,000 bond. At the maturity date, you receive $1,000 (face value) but no interest between the time you bought it and the maturity date.

Mutual Fund Organization Investor C [$1,000] CiscoPfizerMicrosoft Mutual Fund [$4,000] Investor D [$1,000]Investor B [$1,000]Investor A [$1,000] Coca Cola

PYRAMID OF INVESTMENT RISK

INVESTMENT OPTIONS YIELD RANGE IN RECENT YEARS FINANCIAL RISK INFLATION HEDGE LIQUIDITY STOCKS Common Preferred 0-20%5-9% Medium to High GoodHigh BONDS Municipal Corporate ( High Quality ) Corporate ( High Quality ) Junk Bonds Junk Bonds3-10%6-11%8-14% Low to Medium Low to Medium High None Varies, Immediate to 30 Years MUTUAL FUNDS (Money market, fund stocks, bonds) 0-16% Low to High Depends on skill of manager and fund objectives GoodHigh REAL ESTATE (Home, rental unit, commercial property) 0-20% Medium to High GoodLow COLLECTIBLES (Art, antiques, precious metals, gems) Few collections yield profits HighVaries Low to Moderate