1. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 1 19-1 19-1Saving and Investment Planning 19-2 19-2Stock Investments 19-3 19-3Bonds and Mutual Funds 19-4 19-4Real Estate Investments 19-5 19-5Other Investments 19 C H A P T E R Savings and Investment Strategies

2. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 2 SAVING AND INVESTMENT BASICS ●Savings and investment activities ●10% of each paycheck for savings ●Investing means using your money to make more money ●Time Value of Money PV = FV x [ 1 ÷ (1 + i) n ] ●PV = Present value ●FV = Future Value ●i = interest ●n = time

3. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 3 SAVING AND INVESTMENT BASICS ●TVM ExampleFV = 100 i = 8% n = 2 ●PV = FV x [ 1 ÷ (1 + i) n ] ●PV = 100 x [ 1 ÷ (1 +.08)2 ] ●PV = 100 x [ 1 ÷ 1.1664] ●PV = 100 x [.08573388] ●PV = $85.73 ●The growth of savings ●Interest ●Compound interest

4. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 4 SAVING AND INVESTMENT CHOICES ●Savings plans ●Savings account ●Certificate of deposit ●Money market account ●Large amounts ●Int. is paid on corporate & Gov. securities ●Securities ●Stock investments ●You buy a share of company ●Bond investments ●Lending money to Gov. or business to use ●Mutual funds ●Invest in a variety of securities ●Alternative investments ●Real estate ●Commodities ●Grain, Livestock, precious metals ●Collectibles

5. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 5 EVALUATING SAVINGS AND INVESTMENTS ●Safety and risk ●Up to $250,000 now ●Potential return ●Yield is the % of money earned on your savings or investment ●Liquidity ●Investments that can be turned into cash quickly ●Taxes ●Earning from savings & investments are taxed. So if you make $100 and are taxed 20% you have only earned $80

6. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 6 INVESTMENT PYRAMID

7. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 7 TYPES OF STOCK ●Preferred stock ●Has priority over common ●No voting rights ●Get paid before common stock holders ●Common stock ●General ownership ●Could get paid more then preferred ●Example company issues $100,000 dividend stock with 6% rate. Company makes $20,000. Preferred gets $6,000 (100,000 X.06) and Common gets $14,000 ($20,000-$6,000) ●But what if instead 6% it was 20%

8. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 8 STOCK TRANSACTIONS ●Using a stockbroker ●Full-service broker: work for large brokerage houses and research stocks ●Discount Broker: just places orders and offers limited research ●Online investing ●Etrade

9. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 9 STOCK TRANSACTIONS ●Stock exchanges ●Business organization that accommodates buying & Selling securities ●NYSE, American Stock Exchange, Chicago, Boston, more than 170 around world ●Smaller companies not traded on stock exchange but over the counter OTC. Example is our NASDAQ National Association of Security Dealers Automated Quotations ●Changing stock values ●Market Value is the price at which a share of stock can be bought and sold in the stock market ●Stock index Dow Jones & Standard & Poor’s (S&P) larger companies

10. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 10 STOCK MARKET PRICE REPORT

11. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 11 Checkpoint ●What is the purpose of a stock exchange? ●The purpose of a stock exchange is to accommodate the buying and selling of securities.

12. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 12 STOCK SELECTION ●Stock information sources ●S&P, Dow Jones, Moody’s handbook of Common Stock, ●U.S. Securities & Exchange (SEC). Require businesses to report detailed reports. ●Economic factors ●Inflation ●Interest rates ●Consumer spending ●Employment

13. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 13 STOCK SELECTION ●Company factors ●Has it been profitable ●Good business decisions ●Growth potential ●Large amount of debts ●Compare to others in industry ●Yield ●Example if paying $0.60 a share quarterly that would be $2.40 a year. If stock was selling at $40 then ●Dividend per share/Market price per share $2.40/40 =.06 or 6%

14. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 14 GOVERNMENT BONDS ●Municipal bonds ●Bonds issued by local & state governments ●New park ●U.S. savings bonds ●Series EE bought a ½ is value. A $50 bond costs $25 ●I bond purchased at face value

15. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 15 GOVERNMENT BONDS ●Other federal securities ●Federal notes (T-notes) ●1-10 years ●Treasury bills (T-bills) ●90 days ●Treasury bonds (T-bonds) ●30 years

16. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 16 CORPORATE BONDS ●Bond components ●Face value/maturity value amount borrowed ●Bond values ●Depends on market value of bond and the changing interests rates

17. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 17 MUTUAL FUNDS ●A mutual fund is an investment fund set up and managed by companies that receive money from many investors. ●Aggressive-growth stock funds ●High risk, quick growth ●Income funds ●Pay regular dividens

18. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 18 TYPES OF MUTUAL FUNDS ●International funds ●Companies around the world ●Sector funds ●Same industry such as health care, energy ●Bond funds ●Corporate bonds ●Balanced funds ●Both stocks & bonds

19. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 19 MUTUAL FUND VALUES ●Shares of the mutual fund ●Value of each share ●Net asset value (NAV) ●Worth $400,000 & 80,000 shares ●$400,000 / 80,000 = $5 (NAV) ●Operating expenses ●Earnings

20. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 20 SELECTING HOUSING ●Renting your residence ●Owning a mobile home ●Buying a home (mortgage) ●Services of real estate agents ●Other real estate professionals (appraiser) ●Buying a condominium

21. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 21 BENEFITS OF HOME OWNERSHIP ●Tax benefits ●Interest paid on mortgage ●Property Taxes ●Increased equity ●Equity difference between price you could sell your house vs. amount you still owe

22. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 22 COSTS OF HOME OWNERSHIP ●Property taxes ●Interest payments ●Property insurance ●Maintenance

23. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 23 COMMODITIES AND FUTURES ●Commodity exchanges ●Agricultural commodities ●Gold, silver, and precious metals ●Currency and financial instruments

24. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE 24 COLLECTIBLES ●Types of collectibles ●Collectible values