Beruflich Dokumente
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Markets
Chapter 11
Starting Out
The TWO main ways for people to get
rich in this country is starting a
business and investing. So using
information, why is investing
important to learn about?
It allows you to make money
2. Reward
We want HIGH Reward
3. Liquidity
We want HIGH Liquidity
Buying Stock
What are 3 major stock market in the U.S.?
1. New York Stock Exchange (NYSE)
Largest market in the world
Why?
Why do corporations sell stock?
To raise money for expansion or
business expenses
Reward Liquidity
A Basket???
Mutual funds are like a basket of stocks.
This means
You own a small amount of many stocks
Raise Money
Corporations can raise money in three
ways
1. Borrow money from the bank
2. Sell stock
3. Issue bonds
What is a bond?
An IOU from a company
Private investors loaning money to
companies that will be paid back plus
interest
I Owe You
What 3 things make up a bond?
1. Maturity Date:
Length of time when the investor is paid
back
2. Coupon Rate:
The interest received
3. Par Value
The bonds value; to be paid at the
maturity date
4. Yield
Yearly return on a bond until maturity
Stocks or Bonds???
Why would companies rather issue
bonds OVER stocks?
Stocks make a company give up
ownership while bonds do not
Reward
Liquidity
3. Diversity
Dont put all of your eggs into one
basket
The Rule of 72
The Rule of 72 tells you how long it
will take your investment to DOUBLE
Heres how it works
Regardless of the dollar amount, take
72 and divide it by the interest rate
(with no decimal)
Ex. How long will it take your $5,000 savings
account to double with an interest rate of
72
3%?
= 24
3 years
Reward
Liquidity
Quick Quiz
Would you rather have $1,000
or a penny doubled every day
for a month (31 days)?
A penny doubled every day
is about $11 million
Shows the power of
compounding
Reward
Liquidity
Most
Risk
Bonds
Mutual Funds
CDs
Savings Account
Least
amou
nt of
Risk