1. Chapter 6.2 Investing: Taking Risks With Your Savings

2. Objective The SWBAT explain how stocks and bonds differ The SWBAT describe what investment funds are available in stock and bond markets

3. Corporations Stocks Stockholders How stockholders make money Speculate Capital gains Capital loss Tax-exempt bonds

4. Savings bonds Treasury bills Treasury notes Treasury bonds Broker Over-the-counter markets Bond Markets Mutual Funds

5. Index Managed mutual fund Money market fund Money market deposit accounts Securities and Exchange Commission

6. Stock and Bonds Corporations –Are formed by selling shares of stock* –required to sell stock –Stocks –Carry the greatest risk –Stockholders »People who have invested in a corporation and own some of its stock

7. Stock and Bonds Stockholders –Make money in two ways Dividends –The money return a stockholder receives on the amount he or she originally invested in the company*

8. Stock and Bonds Stockholders –Make money in two ways Sell the stock for more than they paid for it –Speculate »Buying a stock hoping that the price will increase greatly and sell it for a profit*

9. Stock and Bonds Capital Gains and Losses –Capital gains Increase in value of an asset from the time it was bought to the time it was sold –Capital loss Decreases in value of an asset or bond from the time it was bought to the time it was sold

10. Type of Investment DefinitionWhen does it payRisks Stock Bond

11. Stock and Bonds Bonds –A certificate issued by a company or the government in exchange for borrowed money*

12. Stock and Bonds Tax-exempt bonds –Bonds sold by local and state governments; interest paid on the bond is not taxed by the local government* Savings bonds –Bonds issued by the federal government as a way of borrowing money; they are purchased at half the face value and increase every 6 months until full face value is reached *

13. Stock and Bonds T-Bills, T-Notes, and T-Bonds –Treasury bills Certificates issued by the U.S. Treasury in exchange for a minimum amount of $1,000 and maturing in 3 months to a year

14. Stock and Bonds Treasury notes –Certificates issued by the U. S. Treasury in exchange for a minimum amounts of $1000 and maturing in 1 to 10 years Treasury bonds –Certificates issued by the U.S. Treasury in exchange for minimum amounts of $1000 and maturing in 10 or more years

15. Stock and Bond Market* Broker –A person who acts as a go-between for buyers and sellers* Over-the-counter markets –An electronic marketplace for stocks not listed on the organized exchanges*

16. Stock and Bond Market Bond Markets –Two largest New York Exchange Bond Market American Exchange Bond Market*

17. Stock and Bond Market Mutual Funds –Investment company that pools the money of many individuals to buy stocks, bonds, or other investments* Index –A measuring system that tracks stock prices over the long run

18. Stock and Bond Market Two most common indexes –Dow-Jones Industrial Average –Standard & Poor’s* Managed mutual fund –One in which the managers adjust the mix of stocks and move often in and out of the market to try to generate the highest yield

19. Stock and Bond Market Money market fund –Uses investors’ money to make short-term loans to businesses and banks* Money market deposit accounts –Advantage The federal government insures them against loss*

20. Government Regulations The Securities and Exchange Commission –Created by the Securities Exchange Act of 1934 –Responsible for administering all federal securities laws –Has regulatory authority over brokerage firms, stock exchanges, and most businesses that issue stock –Investigates and dealings among corporations, such as mergers