Personal Finance 101 CHOICESCARCITYINCENTIVES BENEFIT - COST OPPORTUNITY COST I. KEY TERMS

A. When you borrow money you PAY interest B. When you invest money you EARN interest II. BASIC CONCEPTS

C. Rule of 72 – interest rate divided by 72 = number of years it will take to double your money interest rate divided by 72 = number of years it will take to double your money D.Liquidity - how fast the investment can be turned into cash how fast the investment can be turned into cash

III. YOUR INVESTMENT PORTFOLIO Your $ working for you BenefitCost Checking account -everyday use -easy to access $ w/ atm card Low interest < 1% Savings Account/ Emergency fund Should equal 2 months salary Easy to access Low interest 2-3% IRA (Individual Retirement Account 401k, 403b) Not taxed Cannot access until 65 w/out big penalty

BenefitCost CD (Certificate of Deposit) Fixed interest Fixed time of maturity No risk Cannot access until matures w/out big penalty !!will rollover Real Estate - Ownership - Historical upward trend in Chicago Difficult to turn into cash Down Payment % Bonds – I.O.U.’s to Government or Business Rated - AAA is best Fixed interest Fixed time of maturity Cannot access until matures w/out big penalty

BENEFITCOST stock – share of ownership in a company OwnershipDividend Historical upward trend Minimum # of shares to get in All eggs in one basket Mutual Fund – fund manager spreads your money out in the stock market Diversification Fund manager expertise Historical upward trend 7-8% interest Minimum # of shares to get in

IV.Personal Finance Save early and often 2. Save as much as possible ( 10% of income minimum) ( 10% of income minimum) 3. Have a plan 4. Save and Invest for the long term 5. Gather information before deciding (benefit –cost analysis) (benefit –cost analysis)

BULL MARKET – STOCKS ARE ON THE RISE, GOOD TIME TO SELL BEAR MARKET – STOCKS ARE DOWN, GOOD TIME TO BUY CHICAGO BOARD OF TRADE (CBOT)

STOCK MARKET VOCABULARY STOCK MARKET VOCABULARY STOCK – SHARE OF OWNERSHIP DIVIDEND – PROFITS PAID TO A SHAREHOLDER BLUE CHIPS – STOCKS THAT HAVE CONSISTANTLY DONE WELL BLUE CHIPS – STOCKS THAT HAVE CONSISTANTLY DONE WELL

Market Cap = Total value of a company Securities and Exchange Commission (SEC) – government agency that regulates – government agency that regulates the stock market the stock market

MARKETS NYSE (New York Stock Exchange) companies (New York Stock Exchange) companies hybrid of electronic and open outcry hybrid of electronic and open outcry AMEX (American Stock Exchange) NASDAQ ( National Association of Securities Dealers Automated Quotations) electronic, screen – based companies ( National Association of Securities Dealers Automated Quotations) electronic, screen – based companiesCBOT ( Chicago Board of Trade ) 1848 Futures and Options ( Chicago Board of Trade ) 1848 Futures and Options CME ( Chicago Mercantile Exchange)

INDICES ( INDEX) DOW JONES - Top 30 companies S+P Standard and Poor top Standard and Poor top 500NASDAQ – measures all 3200 stocks trades on NASDAQ Russell 2000

Parent Company Current price for 1 share Click here to find industry Stock Symbol for coca- cola Where traded NYSE = New York Stock Exchange Market price of the entire company, total value 1 year high and low stock price