To be able to analyze the risk of an investment.

1. Inflation  The consistent rise in prices of goods and services over time  Example – McDonald’s hamburger in 1967 costs 10 cents, now it costs about a dollar  Why?

1. Inflation  If your rate of return is less than the inflation rate, you are actually losing the value of your investment – EVEN IF YOU HAVE MORE MONEY! Item Dozen Eggs$1.15$1.35 Gallon of Milk$1.46$3.27 Gallon of Gas$1.12$2.78

2. Interest Rate  If the Federal Reserve adjusts interest rates, you might be locked into a higher or lower interest rate than what is currently available

2. Interest Rate  Adjustable – Rate for your investment changes with the Federal rates  Fixed – Rate stays the same throughout the loan or investment

3. Business Failure  Investments in companies that go bankrupt are lost!  This can be minimized depending on the company

4. Financial Market  The public’s perception of the economy and various financial markets

5. Global Events  When events around the world effect the value of certain investments  Example: After 9/11, which investments lost value? Which gained value?

How would you change the risk continuum after knowing the types of risk?

To be able to analyze the risk of an investment.