1. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY I NVESTING I NTERNATIONALLY L ESSON 19

2. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY The Benefits and Costs of Investing Internationally Benefits ■Diversification: Investors can spread risk by owning stocks or bonds of foreign businesses ■Growth: Some foreign businesses may be growing faster than domestic businesses; this may be especially true for emerging markets Costs ■Currency risk: Exchange-rate changes may mean losses or gains ■Instability: Businesses in emerging markets may experience unexpected economic or political changes ■Accounting standards: Some markets in other countries require less disclosure of information ■Taxes: International investments may be taxed differently than domestic investments. L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.1

3. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY International Revenue for Selected U.S. Companies Company NameDescription2010 Revenues 2010 percentage of revenues from international markets Coca-ColaSoft Drinks$35 Billion75% McDonald’sFast Food$24 Billion60% PfizerPharmaceuticals$43 Billion55% Procter & GambleConsumer Products$79 Billion32% L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.2

4. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Exchange Rate Examples Converting dollars to yen ■ 1 U.S. dollar = 76.8 Japanese yen ■ A Japanese company’s stock sells for 3,800 yen per share ■ How many shares can be purchased with $10,000? ■ $10,000 x (76.8 yen / $1) = 768,000 yen ■ 768,000 yen / 3,800 yen per share = 202.1 shares Converting yen to dollars ■ 1 yen = 0.01 U.S. dollar ■ A U.S. company’s stock sells for $80 per share ■ How many shares can be purchased with 1,000,000 yen? ■ 1,000,000 yen x ($0.01 / yen) = $13,022 ■ $13,022 / $80 per share = 162.8 shares L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.3

5. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Strong Dollar, Weak Dollar What is a strong dollar? ■ The value of the dollar rises compared to another currency, or more than one other. ■ More foreign currency is necessary to purchase U.S. dollars. ■ The value of the dollar is appreciating What is a weak dollar? ■ The value of the dollar falls compared to another currency, or more than one other. ■ More U.S. dollars are necessary to purchase foreign currency. ■ The value of the dollar is depreciating. L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.4

6. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Exchange Rate Changes Dollar appreciates ■ Before appreciation: 1 U.S. dollar = 76.8 Japanese yen ■ After appreciation: 1 U.S. dollar = 80.5 Japanese yen ■ $1 buys more yen ■ $10,000 x (80.5 yen / $1) = 805,000 yen ■ 805,000 yen / 3,800 yen per share = 211.8 shares (202.1 when dollar was “weaker”) Dollar depreciates ■ Before depreciation: 1 U.S. dollar = 76.8 Japanese yen ■ After depreciation: 1 U.S. dollar = 70.5 Japanese yen ■ $1 buys less yen ■ $10,000 x (70.5 yen / $1) = 705,000 yen ■ 705,000 yen / 3,800 yen per share = 185.5 shares (202.1 when dollar was “stronger”) L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.5

7. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Strong Dollar Impact Who is helped by a strong dollar? ■ U.S. consumers: they pay less for foreign goods and services. ■ U.S. investors who invest in companies in other nations: they pay less for foreign currency. ■ U.S. importers: they can sell imported goods and services at lower prices. Who is hurt by a strong dollar? ■ U.S. producers: they are competing with lower- priced imports. ■ Foreign consumers: U.S. goods and services are more expensive for them to purchase. ■ U.S. exporters: American goods and services become more expensive for foreign consumers. L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.5

8. L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Weak Dollar Impact Who is hurt by a weak dollar? ■ U.S. consumers: they pay more for foreign goods and services. ■ U.S. investors who invest in companies in other nations: the price of foreign currency increases. ■ Foreign exporters: the prices of foreign goods and services are higher. Who is helped by a weak dollar? ■ U.S. producers: they are competing with higher- priced imports. ■ Foreign consumers: U.S. goods and services are less expensive for them to purchase. ■ U.S. exporters: American goods and services become less expensive for foreign consumers. L ESSON 19 – I NVESTING I NTERNATIONALLY S LIDE 19.6