Definitions
Shareholder
Money that is saved in a bank
Savings Account
Dallas Goedert puts $10 in a savings account. The savings account gives him 10% yearly in interest. If he takes his money out after 1 year, how much interest did he earn?
I = Prt
P = $10
r = .1
t = 1
I = $1
You're planning an amazing trip to Europe that will take place in two years, and you've set aside $5,000 for it. You want to ensure that this money grows but without too much risk. What would be the most suitable action?
a) Investing the money in a low-risk bond fund
b) Give the money to a friend that will pay you an extra 10 dollars for loaning it to him
c) Purchasing shares of a single company known for its stability and consistent dividends
d) Keeping the money in a traditional savings account
a) Investing the money in a low-risk bond fund
Money won't grow, in fact, it will become less powerful, but you can use it right away
Piggy Bank
The chance you might lose some or all of your money
Risk
Every 3 months, or a fourth of a year (think football)
A quarter
AJ Brown deposited $4,900 in an account that earns interest at 2% yearly. If he keeps his money in the account for 3 years, how much interest will AJ earn?
I = Prt
P = 4900, r = 0.02 (2%), t = 3
I = 4900 x 0.02 x 3
I = $294
You have received a cash gift of $1,000 for your graduation. You want to grow this money for your future, but you're open to taking some risks for potentially higher returns. What would be the most appropriate action?
a) Investing the money in a government bond
b) Putting the money into a high-yield savings account
c) Purchasing shares of a well-established company with a track record of consistent growth
d) Keeping the money in a traditional savings account
c) Purchasing shares of a well-established company with a track record of consistent growth
You'll give me some money, which I will use. In return, I will give you a small amount back yearly. Since I'm only giving you a little bit of money, I feel bad so I will let you take your money back any second that you want.
Savings Account
Loans to companies or governments
Bonds
If you buy this, you are buying a small portion of a company
A Stock
The Philadelphia Eagles can choose between 2 savings accounts. They are told that if they put $1,000 in M&T Bank for 10 years, they will receive 10% yearly interest. Lincoln Financial comes along and tells them that if they put $1000 with them for 9 years, they will receive 11% interest. Which option returns the most amount of interest?
M&T: I = Prt = 1000 x .1 x 10 = 1000
Lincoln Financial: I = Prt = 1000 x .11 x = 990
Therefore, M&T gives them the most interest (not necessarily the right decision)
You think the Ravens will make the Super Bowl next year and you want to go. You and your friends have each saved up $1000 to buy tickets to the Super Bowl next year. You've estimated that the tickets will cost around $1400 each, and you have to buy tickets in 8 months from now. You are ok if you lose some money, but you want the best possible chance of getting the tickets.
Put the money in a mutual fund with more stocks than bonds.
You can earn a lot of money with me, but there is a risk that you will lose all your money also! You can buy me and then sell me to make a profit if my price goes up.
Stocks
A collection of different stocks and bonds
Mutual Fund
Interest
Devonta Smith puts his massive signing bonus of $500 in an account that gives him 10% interest per year. If he takes the money out after 7 months, how much did he earn? HINT: IT WAS NOT IN THE ACCOUNT FOR THE FULL YEAR, HOW CAN YOU REPRESENT HOW LONG IT WAS IN THE ACCOUNT FOR?
I = prt
p = 500
r = 10% (0.1)
t = 7/12 = 0.58
I = $29
I want to retire in 40 years. I don't love taking risks, but I'm looking to make about 7% a year.
A mutual fund with more bonds than stocks
Money will grow over time by investing in a diversified portfolio managed by professionals, great if you're not comfortable with a lot of risk.
Mutual Fund
How easy it is to move money around (example: from an investment to your pocket)
Liquidity
When you make different types of investments to minimize risk
Diversify
Jalen Hurts finds a house for $155,00. He takes out a 30 year mortgage (a loan) from his bank. Over those 30 years, he will have paid $232,500 in interest. What is the interest rate of the loan?
r = I/pt r = 232,500/(155,000 * 30)
I = 232,500 r = 0.05 (5%)
p = 155,500
t= 30
You have $1,000 saved up from your summer job, and you want to put it towards a long-term goal, like buying a car in five years. Which of the following options is the most suitable for your goal?
a) Keeping the money in a piggy bank at home
b) Putting the money in a high yield savings account
c) Purchasing individual stocks of a tech company
d) Putting the money in a bank
b) putting the money in a high yield savings account
I will give you a steady amount of money over time for lending money to me. You probably won't make a whole lot, but it's a good and safe option to earn some money.
Bonds