Assets-Liabilities = Net Worth
Assets—anything
an individual or business owns that
has commercial or exchange value
Liabilities—Money
an individual or organization
owes; same as debt
Net
Worth—The difference between the total assets
and total liabilities of an individual

Wealth-creating assets are possessions that
generally increase in value over time or provide
a return

Depreciation is the decrease in an asset’s
value over time. Items that wear out or have a
falling price depreciate.

Equity
◦ the difference between the market value
of the home and the amount of the
mortgage on the home
◦ How much your home is worth compared
to how much you owe on your home
BOTTOM LINE: Your net worth is your
wealth
Choose one item from the following list and answer
these three questions:
1. A specific description of your goal ($,item,etc.)
2. Time frame for achieving your goal
3. Financial resources required to achieve your
goal (savings and income)
Buy a new vehicle
Go to college
Buy a used vehicle
Go to the prom
Rent an apartment
Take a trip
Buy a house
Buy a new Big Screen TV
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



Find an article from a newspaper or
magazine that deals with the results of
Hurricane Sandy.
Explain how this will affect the supply or
demand for a good or service.
Your report should be a minimum of 100
words.
Attach a copy of the article to your paper.
DUE DATE: Tuesday, 4/2
Year
Beginning Balance
Interest Paid
Ending Balance
1
$100
($100 x 5%=) $5
$105
2
$105
($100 x 5%=) $5
$110
3
$110
($100 x 5%=) $5
$115
4
$115
($100 x 5%=) $5
$120
Year
Beginning
Balance
Interest Paid
Ending Balance
1
$100
($100 x 5%=) $5
$105
2
$105
($105 x 5%=) $5.25
$110.25
3
$110.25
($110.25 x 5%=) $5.51
$115.76
4
$115.76
($115.76 x 5%=) $5.79
$121.55
INTEREST—is a fee for the use of money over
time.
Simple Interest—the interest payment is
computed as a percentage of the original
deposit amount or principal
Compound Interest—interest that is paid on
both the principal and also on any interest
from past years
After 4 years, the difference is only $1.55
 After 10 years though, the difference is
$12.90
 After 20 years, the difference is $65.33
 If your original investment was $500, after
20 years the difference would be $326.00

Think about compound interest and
answer the following question:
Would you rather receive $100,000
today or 1 cent with a promise that if
you hold all of the money that you are
given, the amount will be doubled
each day for a month (30 days)?
Day
Amount
Day
Amount
1
$0.01
16
$327.68
2
$0.02
17
$655.36
3
$0.04
18
$1,310.72
4
$0.08
19
$2,621.44
5
$0.16
20
$5,242.88
6
$0.32
21
$10,485.76
7
$0.64
22
$20,971.52
8
$1.28
23
$41,943.04
9
$2.56
24
$83,886.08
10
$5.12
25
$167,772.16
11
$10.24
26
$335,544.32
12
$20.48
27
$671,088.64
13
$40.96
28
$1,342,177.28
14
$81.92
29
$2,684,354.56
15
$163.84
30
$5,368,709.12
True or False?
1. The more money people save, the less
money there is available for investments.
2. The rule of 72 refers to the amount of time
it takes to save for a 72 Corvette.
3. People should choose to save when the
interest rate on savings is 3 percent and the
cost of living is rising by 4.5 percent.
4. Inflation does not influence saving or
investment decisions.
For the following question,
include ideas of risk and return
in your answer:
If you were to receive $10,000,
how would you invest the
money?


Banks are businesses, but they do not
manufacture products or grow crops
Banks make money by selling financial services
 Car/truck loans, home mortgage loans, business loans


People come to banks looking for a safe place to
keep their money (Savers)
Or they come to banks looking to get money to
buy a house, start a business, pay for college
(Borrowers)


Banks take the money they have in deposits
(savings) and loan it to those who want to buy
things (borrowers)
They make a profit with the difference between
the interest rates they charge
What factors should a saver consider in choosing a
bank?
 The interest rate
 Fees including: ATM, NSF, withdrawal
 Monthly balance if required
What factors do banks consider before lending $?
 How much debt do you have
 What type of credit (credit cards, vehicle loans,
mortgages)
 Do you have a history of repaying your loans
 How promptly you pay your bills (have you ever
been late!)
List 7 markets that you participated in over the
last month. (EX: Wal-Mart.)
Thinking about these markets, write down 3
answers to the following: “We couldn’t have
markets unless we had _________ “
Just as there is a market for music (iTunes),
jeans (department stores) or food (Wendy’s)
there is also a market for stocks.


a share of ownership in a company
People buy stock expecting the company to
do well, which will increase the price of the
stock
You make money two basic ways:
1. The price increases and you sell it at a
higher price
a) This is called a capital gain
b) CG is the difference between the purchase
and the sale price of a share of stock
2. Dividends
a.) If the company does well, they can issue
their stockholders a dividend
b.) This is a percentage of the company’s
profits
The Dow Jones Industrial Average (DJIA) is the
oldest measuring index for the Stock Market
 It takes an average of the 30 most actively
traded industrial companies

Bulls and Bears
A bull market means
that people are
optimistic and
believe the market
will increase.
A bear market means
that people are
pessimistic and
believe the market
will decrease.



An increase in stock prices causes an increase
in wealth, and consequently an increase in
consumer spending.
As the stock market goes up and down, it can
cause companies to be optimistic about the
future.
They may decide to increase production or
offer new products
Investment BasicsBasics: Risk/Return
The RISKIER the Investment
The HIGHER the Return
•
•
Types of investments:
Insured Savings Accounts
Savings Bonds
•
•
•
Certificates of Deposit
Treasury Bonds
Corporate Bonds
•
•
•
Mutual Funds
Stocks
Collectibles
•
Commodities
Mattress
 Passbook savings account
 CD
 U.S. Government Savings Bond
 Money market mutual fund
 Stocks
 Stock mutual fund

Advantages
 Use a good today and
pay for it later
 Acquire assets: car,
house, college
 Help with an
emergency
 Take advantage of a
unique opportunity to
buy
 Pay back with cheaper
dollars in a time of
inflation
Disadvantages
 Loans have to be
repaid with interest
 Convenient credit
might encourage
impulse buying
 People may use too
much credit compared
to their income
 Poor credit use can
harm credit ratings
 A poor credit rating
can make credit more
expensive in the future


Credit cards allow people to “buy now, pay later”
Credit cards enable people to obtain instant loans
from banks, gasoline companies, department
stores, etc.


Most credit
cards come
with limits as
to how much a
person can
borrow
Most allow for
cash advances
and most
charge a fee
for these
advances
 Interest
charges on credit cards can
be as high as 26%
 The average American has 1-3
credit cards and owes credit-card
balances of approximately $8,000
 Most Americans save very little of
their disposable income
 The credit card debt of low-income
families continues to rise



If credit card companies can get you in debt early, they
may be able to keep you in debt for life.
You're either paying interest or making interest, and the
paying side is worse in more ways than one.
$1000 invested at a productive rate of 10% would turn
into $17,450 over thirty years, but in the same time
$1000 debt at 23.99% credit card interest would become
$633,285 !
1. Character—refers to
the financial history of
the borrower..Do you
pay your bills on time?
Have you had credit
before?
2. Capacity—ability to
pay back the loan..Do
you have a job or
another income
source?
3. Collateral—an item of value pledged against
the debt; car or house. With credit cards, the
collateral could be the money in your savings.
If it is a car loan, the car could be the collateral
4. Conditions—how you plan to use the money,
What is the purpose of the loan? Vehicle?
Education? Business? Home?