Understand the role of finance in business.

Transcription

1 Understand the role of finance in business.

2 Understand saving and investing options for clients.

3 Saving and investing basics Saving and investing options Evaluation factors for savings and investing options

4 Complete Forbes 400 Wealthiest Individuals Activity

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6 Reasons money is borrowed by the following: Individuals: to purchase large ticket items such as homes and cars Businesses: to operate or expand their business; purchase a building, replace old equipment or offering new products Government: to improve or expand transportation, schools or other public services

7 What is saving? Putting away money for future use Where? What is investing? Using savings to earn more money for future financial security Where?

8 Saving influences on economic activity makes more money available to be used by individuals, businesses and government When the borrowed money is spent, the demand for goods and services increases which creates more jobs and spending for workers

9 Main goals of savers and investors include making available immediate income and long-term growth

10 Growth of savings is interest earned when other borrow your money Simple interest is the amount of $$ paid to saver on the amount deposited for a period of time Compound interest is the amount of $$ paid to saver on the amount deposited AND interest previously earned for a period of time

11 I = P*R*T P = Principal (initial amount you borrow or deposit) R= Rate T = Time I = Interest Rate

12 A=P(1+r/n) nt A = Amount P = Principal (initial amt. you borrow or deposit) r = Annual rate of interest n = Number of times interest is compounded t = time in years

13 Impact of compound frequency on savings growth rate: the more times the interest is compounded the more growth in savings

14 Use your textbook to complete the Savings Options Organizer. Page 482 Be prepared to share your answers and examples.

15 Savings account: usually allows a low or zero balance, deposit or withdrawals (without penalties) anytime and pays low interest rate. Certificates of deposit (CDs): a minimum deposit remains for a set period of time; penalty is withdrawn early Money market account: a minimum deposit, interest earned based on gov t and corp securities; pays slightly higher interest than savings account

16 Since Austin frequently shops for music, he likes having EASY access to his money which is being saved at a local bank. Which savings plan did he choose? Money Market Account Savings Account Certificate of Deposit (CD)

17 Jack and Jill are retired but a conservative. They are planning a vacation to Peru in two years. They need to invest $3,000 for two years and have it earn a slightly higher rate of return than if they put it in a savings account. Which option would be their best bet? Certificate of Deposit Stock Investment

18 Growth of savings is interest earned when other borrow your money Simple interest is the amount of $$ paid to saver on the amount deposited for a period of time Compound interest is the amount of $$ paid to saver on the amount deposited AND interest previously earned for a period of time

19 Introduction to Interest

20 I = P*R*T P = Principal (initial amount you borrow or deposit) R= Rate T = Time I = Interest Rate

21 A=P(1+r/n) nt A = Amount P = Principal (initial amt. you borrow or deposit) r = Annual rate of interest n = Number of times interest is compounded t = time in years

22 Simple interest $1,000 at 10% Year 1: $1,000 *.10 = $100 $1,000 + $100 = $1,100 Year 2: $1,000 *.10 = $100 $1,100 + $100 = $1,200 What would the value be at the end of year 3? Compound interest $1,000 at 10% Year 1: $1,000 *.10 = $100 $1,000 + $100 = $1,100 Year 2: $1,100 *.10 = $110 $1,100 + $110 = $1,210 What would the value be at the end of year 3?

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24 Simple Interest $1,000 *.10 = $100 $1,200 + $100 = $1,300 Compound Interest $1,210 *.10 = $121 $1,210 + $121 = $1,331

25 Simple Interest I = P*R*T 1,000*.10*3 = 300 1, = $1,300 Compound Interest A=P(1+r/n) nt 1,000(1+.1/1) 1*3 1,000(1.1) 3 = $1,331

26 Calculate simple interest on $5,000 after 5 years at 10% interest Calculate compound interest on $5,000 after 5 years compounded monthly at 10% interest

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28 SERIOUSLY, DO THE MATH BEFORE CONTINUING.. REMEMBER: THE PERSON DOING THE WORK IS DOING THE LEARNING AND I EXPECT YOU TO LEARN

29 Simple interest $5,000*.10*5 = $2,500 $5,000 + $2,500 = $7,500 Compound interest $5,000(1+.1/12) 5*12 = $8,226.55

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32 Investments that can be turned into money (cash) quickly are called liquid. Liquidity is the ease in which you can change your investment into cash without losing and money or value on your investment.

33 What is the most liquid investment listed below? House Rare coins (collectibles) Savings account Land

34 The percentage of money you earn on your savings or investments. Which interest rate will yield the highest rate of return for your money? 8% 4% 10%

35 Please take a few minutes to review the games that are in Quia 4.00 Please play them in order.