CHAPTER
19
SLIDE 1
CHAPTER
19
Savings and
Investment Strategies
19-1 Saving and Investment Planning
19-2 Stock Investments
19-3 Bonds and Mutual Funds
19-4 Real Estate Investments
19-5 Other Investments
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
19-1 Saving and
Investment Planning
Goal 1 Explain the basics of saving and
investing.
Goal 2 Identify types of savings and
investments.
Goal 3 Discuss factors to consider when
evaluating savings and investment
alternatives.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 2
CHAPTER
19
SLIDE 3
KEY TERMS
● saving
● investing
● yield
● liquidity
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Principles of Business, 8e
CHAPTER
SAVING AND INVESTMENT
BASICS
19
SLIDE 4
● Savings and investment activities
● Determine investment goals
● The growth of savings
● Interest
● Compound interest
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Principles of Business, 8e
CHAPTER
QUARTERLY COMPOUND
INTEREST
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19
SLIDE 5
Principles of Business, 8e
CHAPTER
19
SLIDE 6
Checkpoint 
● How does saving influence economic
activity?
● Saving benefits the economy by making
more money available for borrowing by
individuals, businesses, and governments.
● When this money is spent, demand for
goods and services increases, resulting in
more jobs and more spending by workers.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
SAVING AND
INVESTMENT CHOICES
● Savings plans
● Savings account
● Certificate of deposit
● Money market account
19
SLIDE 7
● Alternative investments
● Real estate
● Commodities
● Collectibles
● Securities
● Stock investments
● Bond investments
● Mutual funds
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Principles of Business, 8e
CHAPTER
19
SLIDE 8
Checkpoint 
● What are the nine main categories of saving and
investment alternatives?
●
●
●
●
●
●
●
●
●
Savings accounts
Certificates of deposit
Money market accounts
Stock investments
Bond investments
Mutual funds
Real estate
Commodities
Collectibles
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
EVALUATING SAVINGS
AND INVESTMENTS
19
SLIDE 9
● Safety and risk
● Potential return
● Liquidity
● Taxes
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Principles of Business, 8e
CHAPTER
EXAMPLES OF
DIFFERENT YIELDS
19
SLIDE 10
$100 Invested for 20 Years at Different
Yields with Annual Compounding
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Principles of Business, 8e
CHAPTER
19
SLIDE 11
INVESTMENT PYRAMID
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Principles of Business, 8e
CHAPTER
19
SLIDE 12
Checkpoint 
● What are four factors to consider when
selecting an investment?
● Safety
● Return
● Liquidity
● Taxes
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
19-2 Stock Investments
Goal 1 Compare the two major types of
stock.
Goal 2 Describe the activities involved with
buying or selling stock.
Goal 3 Identify factors that affect the value
of a stock.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 13
CHAPTER
19
SLIDE 14
KEY TERMS
● preferred stock
● common stock
● stockbroker
● stock exchange
● market value
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Principles of Business, 8e
CHAPTER
19
SLIDE 15
TYPES OF STOCK
● Preferred stock
● Common stock
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Principles of Business, 8e
CHAPTER
19
SLIDE 16
Checkpoint 
● How does preferred stock differ from common stock?
● Preferred stock has priority over common stock in the
payment of dividends.
● Investing in preferred stock is less risky than common stock,
but preferred stockholders generally have no voting rights
within the corporation.
● Common stock represents general ownership in a
corporation and a right to share in its profits.
● Common stockholders are entitled to one vote per share.
● Although preferred stockholders are paid first, their dividends
usually are limited to a set rate.
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Principles of Business, 8e
CHAPTER
19
SLIDE 17
STOCK TRANSACTIONS
● Using a stockbroker
● Online investing
● Stock exchanges
● Changing stock values
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Principles of Business, 8e
CHAPTER
STOCK MARKET PRICE
REPORT
© 2012 Cengage Learning. All Rights Reserved.
19
SLIDE 18
Principles of Business, 8e
CHAPTER
19
SLIDE 19
Checkpoint 
● What is the purpose of a stock
exchange?
● The purpose of a stock exchange is to
accommodate the buying and selling of
securities.
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Principles of Business, 8e
CHAPTER
19
SLIDE 20
STOCK SELECTION
● Stock information sources
● Economic factors
● Inflation
● Interest rates
● Consumer spending
● Employment
● Company factors
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Principles of Business, 8e
CHAPTER
PROCESS FOR DECIDING
STOCK PURCHASES
19
SLIDE 21
1. Observe and analyze economic and social trends.
2. Determine industries that will be affected.
3. Identify companies in those industries.
4. Decide whether to buy, sell, or hold the stock of those companies.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
19
SLIDE 22
Checkpoint 
● How do various economic factors affect stock prices?
● Inflation affects stock prices by causing lower spending by
consumers, reducing company profits out of which dividends
are paid.
● Falling or rising interest rates can also increase or decrease
company profits as the cost of money changes.
● The employment rate also affects stock prices; when more
people are employed, they spend more money on a
company’s products and stock prices rise.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
19-3 Bonds and
Mutual Funds
Goal 1 List types of government bonds.
Goal 2 Describe features of corporate
bonds.
Goal 3 Describe various types of mutual
funds.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 23
CHAPTER
19
SLIDE 24
KEY TERMS
● municipal bond
● corporate bond
● mutual fund
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Principles of Business, 8e
CHAPTER
19
SLIDE 25
GOVERNMENT BONDS
● Municipal bonds
● U.S. savings bonds
● Other federal securities
● Federal notes (T-notes)
● Treasury bills (T-bills)
● Treasury bonds (T-bonds)
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
19
SLIDE 26
Checkpoint 
● List the types of bonds issued by the
federal government of the United States.
● The types of U.S. savings bonds issued by
the federal government are Series EE
bonds, Series HH bonds, and I bonds.
● The federal government also issues
Treasury bills and Treasury notes.
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Principles of Business, 8e
CHAPTER
19
SLIDE 27
CORPORATE BONDS
● Bond components
● Bond values
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Principles of Business, 8e
CHAPTER
Checkpoint 
19
SLIDE 28
● What affects the value of a bond?
● The value of a bond is affected by changing
interest rates.
● If the bond’s stated rate is lower than interest rates
on similar bonds, investors will want to buy the
bond for less than its face value.
● If the bond’s stated interest rate is higher than
interest rates on similar bonds, the seller of the
bond will want to receive more than its face value.
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Principles of Business, 8e
CHAPTER
19
SLIDE 29
MUTUAL FUNDS
● A mutual fund is an investment fund set up
and managed by companies that receive
money from many investors.
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Principles of Business, 8e
CHAPTER
19
SLIDE 30
TYPES OF MUTUAL FUNDS
● Aggressive-growth stock funds
● Income funds
● International funds
● Sector funds
● Bond funds
● Balanced funds
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Principles of Business, 8e
CHAPTER
19
SLIDE 31
MUTUAL FUND VALUES
● Shares of the mutual fund
● Value of each share
● Net asset value (NAV)
● Operating expenses
● Earnings
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
19
SLIDE 32
Checkpoint 
● What are the main types of mutual
funds?
● The main types of mutual funds are
aggressive-growth stock funds, income
funds, international funds, sector funds,
bond funds, and balanced funds.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
19-4 Real Estate
Investments
Goal 1 Describe home buying activities.
Goal 2 Explain the benefits of home
ownership.
Goal 3 Discuss the costs of home
ownership.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 33
CHAPTER
19
SLIDE 34
KEY TERMS
● real estate
● mortgage
● equity
● assessed value
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Principles of Business, 8e
CHAPTER
19
SLIDE 35
SELECTING HOUSING
● Renting your residence
● Owning a mobile home
● Buying a home
● Services of real estate agents
● Other real estate professionals
● Buying a condominium
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Principles of Business, 8e
CHAPTER
Checkpoint 
19
SLIDE 36
● What are four available housing
alternatives?
● Renting
● Owning a mobile home
● Buying a traditional home
● Buying a condominium
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Principles of Business, 8e
CHAPTER
BENEFITS OF HOME
OWNERSHIP
19
SLIDE 37
● Tax benefits
● Increased equity
● Pride of ownership
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Principles of Business, 8e
CHAPTER
19
SLIDE 38
Checkpoint 
● What are the main benefits of home
ownership?
● Tax benefits
● Increased equity
● Pride of ownership
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Principles of Business, 8e
CHAPTER
COSTS OF HOME
OWNERSHIP
19
SLIDE 39
● Property taxes
● Interest payments
● Property insurance
● Maintenance
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Principles of Business, 8e
CHAPTER
19
SLIDE 40
Checkpoint 
● What are common costs of home
ownership?
● Common costs of home ownership are
property taxes, interest payments, property
insurance, and maintenance.
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Principles of Business, 8e
19-5 Other Investments
Goal 1 Discuss types of commodity
investments.
Goal 2 Explain the use of collectibles as an
investment.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 41
CHAPTER
19
SLIDE 42
KEY TERMS
● commodities
● futures contract
● collectibles
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Principles of Business, 8e
CHAPTER
COMMODITIES AND
FUTURES
19
SLIDE 43
● Commodity exchanges
● Agricultural commodities
● Gold, silver, and precious metals
● Currency and financial instruments
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Principles of Business, 8e
CHAPTER
19
SLIDE 44
Checkpoint 
● What types of commodities are
commonly used with futures contracts?
● Types of commodities commonly used with
futures contracts are agricultural
commodities, such as grain and livestock,
and precious metals.
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Principles of Business, 8e
CHAPTER
19
SLIDE 45
COLLECTIBLES
● Types of collectibles
● Collectible values
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
19
SLIDE 46
Checkpoint 
● What are common types of collectibles?
● Common types of collectibles are stamps,
coins, sport trading cards, and antiques, as
well as unusual items purchased as
investments.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e