Sources of Capital CHAPTER 9 SECTION 1: Saving SECTION 2: Investing
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1 Sources of Capital CHAPTER 9 SECTION 1: Saving SECTION 2: Investing Holt Economics4/17/2017CHAPTER 9Sources of CapitalSECTION 1: SavingSECTION 2: InvestingSECTION 3: Stocks, Bonds, and FuturesSECTION 4: Borrowing and CreditChapter 9
2 Objectives: Saving SECTION 1 What benefits do people gain by saving money?How do savings accounts differ from time deposits?How do economists measure savings?
3 Benefits of saving money: SECTION 1SavingBenefits of saving money:securityinterest
4 Difference between savings accounts and time deposits: SECTION 1SavingDifference between savings accounts and time deposits:Savings accountsoffer liquidityhave variable interest ratesTime depositsrequire the saver to leave money in the account for a specific amount of timeoffer higher and fixed interest ratesoffer reduced liquidity
5 SECTION 1SavingEconomists measure savings by calculating the savings rate, or the percentage of people’s unspent disposable income.
6 Objectives: Investing SECTION 2 What are the goals and elements of a personal financial plan?How do financial investment and real investment differ?How does real investment affect economic growth?
7 Goals and elements of a personal financial plan: SECTION 2InvestingGoals and elements of a personal financial plan:spending and saving plan—to create a personal budgetinvestment plan—to put money to workretirement plan—to save and invest money for retirementestate plan—to allow the transfer of a person’s property after death
8 Difference between financial investment and real investment: SECTION 2InvestingDifference between financial investment and real investment:financial investment—exchanging property ownership and payments to make a profitreal investment—using money to create new capital goods
9 SECTION 2InvestingReal investment affects economic growth by increasing the number of capital goods used by producers.
10 Objectives: Stocks, Bonds, and Futures SECTION 3 Why and how do people invest in stocks?What factors influence stock prices?How do corporate and government bonds differ from stocks?What are the advantages and disadvantages of futures?
11 Why and how people invest in stocks: SECTION 3Stocks, Bonds, and FuturesWhy and how people invest in stocks:to gain profitto limit the risk on their investmentsto become a part owner of a corporationHow to invest in stock:buy from a brokerbuy from an investment bank
12 Factors that influence stock prices: SECTION 3Stocks, Bonds, and FuturesFactors that influence stock prices:corporate financesinvestor expectationsexternal forces, such as changes in the economy or international events
13 Corporate and government bonds SECTION 3Stocks, Bonds, and FuturesCorporate and government bondsoffer lower interest than stock dividendsoffer less risk than stock
14 Advantages of futures: SECTION 3Stocks, Bonds, and FuturesAdvantages of futures:high profit potentialguarantee that original purchase price of the futures will be honoredDisadvantages of futures:high riskrequires specialized knowledge about commodities being bought or sold
15 Objectives: Borrowing and Credit SECTION 4 How do lenders make money on loans?What factors influence a credit rating?How can credit help the economy?
16 Ways lenders make money on loans: SECTION 4Borrowing and CreditWays lenders make money on loans:interestrepossession
17 Factors that influence a credit rating: SECTION 4Borrowing and CreditFactors that influence a credit rating:ability to paynumber of assets ownedcredit history
18 Benefits of credit to the economy: SECTION 4Borrowing and CreditBenefits of credit to the economy:stimulates growthpromotes stability
19 CHAPTER 9Wrap-Up1. Identify which of the following savings plans would provide the greatest possible liquidity: regular savings accounts, certificates of deposit, savings bonds. Explain your answer.2. Why do economists study savings rates? Name one important determinant of savings rates in the United States.3. Explain the difference between financial investment and real investment. Provide an example of each type of investment.
20 CHAPTER 9Wrap-Up4. Describe the different ways that you can earn profits from stock purchases. Compare a capital gain and a capital loss.5. How does a broker’s job differ from that of a market analyst?6. What are the benefits and liabilities of credit? Describe three pieces of legislation that protect consumers from unfair credit practices.