Download CP World History (Unit 7, #2)

CP Economics (Chapter 11, #2) GPS SSEPF2
Name ______________________________
Date ___________________ Period______
Financial Institutions for Saving and Investing
Warm Up #38----Barriers in Real-World Trade
1. What were the three legs of the “golden triangle”?
1.
2. How are U.S. farm subsidies and EU tariffs on farm imports related forms of trade
barriers?
2.
3. Why would the business community be concerned about countries’ putting up new
trade barriers
3.
I. What are the ways that people see their money grow?
A. _______________________________
1. Money deposited in a bank or other financial institutions, __________________________________________
B. ________________________________
2. Money earned for the use of your savings
C. ________________________________
3. Money you pay into a business with the expectation, but NOT the guarantee, of future rewards.
II. What kinds of Financial Institutions can I place my money?
A. _________________________________
1. Receive deposits of money, extend credit, and provide loans, __________________________.
B. ________________________________
1. A not-for-profit, that is owned and controlled by its members, offer checking, savings, and grant loans.
C. ________________________________________________
1. Lend money out for mortgages
III. Who insures the money that you put into banks?
A. _______________________________________________.
1. Protects deposits up to $250,000, if the bank goes bankrupt, you will not lose your money.
IV. When and where do you invest money?
A. In a ______________________________ or the ________________________________ for a specified time, in return for interest. But you are
taking a risk of losing money as well.
B. ____________________________
1. The greater the risk you are willing to take the higher the potential rewards you can earn
C. ____________________________
1. The lower the risk you are willing to take the lower the potential rewards you will earn
V. Risk and Return
A. What kind of risk are you willing to take?
1. _____________________ usually means loss of part ________________________ investment, or principal
i. no-risk ____________________________: insured savings and CDs, U.S. government bonds
2. Safe investments risk interest rate may not keep up with _____________________________
3. Return on riskier investments depends on how profitable company is
i. bonds less risky than stocks; bondholders paid off first
B. What kind of return do you want?
1. ______________________ investments have ________________________ return through fixed interest rates
2. ______________________, bonds-- ____________ ________________________ rates; stocks—higher return over time
i. If investing over a long period, can risk losses in stock some years
ii. If less time and money, may want safer investment
3. ______________________________ gives better chance offsetting a loss with a ____________________
VI. Three most important kinds of investments are:
A. ______________________
1. Lending money to a firm, government (state/local), or public construction project. It pays you interest periodically and then repays the cost of
your bond + interest years later, when it “_______________________”.
B. ______________________
1. Buying shares in the ownership of a corporation, earning a _____________________ from the corporation’s profits, but is the riskiest with
the highest potential rewards.
i. ________________________
a. When you earn a profit
C. ______________________________
1. Pools _______________________ from many ________________________ and uses it to buy a variety of stocks and bonds called a
___________________________.
i. Usually combines ______________________ with _______________________ stocks so investors can never lose all their money.
VII. Why Buy Bonds?
A. Types of Bonds
1. U.S. government issues Treasury bonds, notes, bills; very safe
2. Safety of foreign government bonds depends on the country
3. _____________________________________________________________________________________
4. Corporate bonds higher risk than government, pay higher coupon rate
i. _________________________ are high-risk, high-yield corporate bonds
VIII. The Stock Market
A. Why Buy Stock?
1. Buy to earn _________________________, share of company profits
i. investors who want income, want dividends
2. Buy to earn ____________________ __________________ through resale of stock
i. investors who want growth look for potential for capital gains
B. Types of Stock
1. _______________________________-- gives shareholders ___________________ ______________________, share of profits
i. one vote per share owned to elect board of directors
2. _______________________________-- gives shareholders share of profits, no voting rights
i. investors get ________________________ ___________________________, paid off first if company closed
ii. dividends do not increase if stock increases in value
VIX. Trading Stock
A. KEY CONCEPTS
1. Most people buy stock to earn __________________________________
2. Stock prices determined by demand and supply; influencing factors:
i. company profits or losses, technological advances, overall economy
3. _______________________________-- buys and sells securities for customers, earns commission
4. Organized Stock Exchanges
i. New York Stock Exchange (NYSE) on Wall Street; _________________________________________________.
a. traditionally, each stock auctioned from trading post on exchange floor
b. today, hand-held computers used to execute many trades
c. 2006 merger with Archipelago Exchange allowed ______________________________________
ii. American Stock Exchange (AMEX) companies smaller than on the NYSE
5. Electronic Markets
i. _______________________________________ (OTC) market for stocks not traded on NYSE or AMEX
ii. _____________________________ is centralized computer system for OTC trading
a. ___________________ _______________________ ______________________ in world in number of companies, shared
traded
b. companies from many sectors of U.S. economy, most in technology
iii. OTC Bulletin Board is electronic market for _______________________ _________________________
X. Measuring How Stocks Perform
A. Tracking the Dow
1. __________________________-- prices rise steadily over a relatively long period
i. 1972 to 2000 longest bull market in history; most last two to three years
2. __________________________-- prices decline steadily over a relatively long period
i. Dow affected by the previous close also the Fed, foreign indexes, and trade balance.
Closure Activity #33:
Mellody Hobson: Investing in the Future p. 326
Why does Mellody Hobson want to make more people aware of investing?