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Investments Brian Wassmuth

Investments Brian Wassmuth. How they work. First, What is Interest ?. Interest is ‘The Price Paid for the Use of Money’ -McConnell, Brue Remember, money is NOT an economic resource. It cannot produce goods or services. Money as a Tool.

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Investments Brian Wassmuth

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  1. InvestmentsBrian Wassmuth How they work

  2. First, What is Interest? • Interest is ‘The Price Paid for the Use of Money’ -McConnell, Brue • Remember, money is NOT an economic resource. • It cannot produce goods or services.

  3. Money as a Tool • However, it is a useful tool that can be used to acquire goods and resources. • Example • If you needed to rent a truck to move your company’s supplies from one place to another, you would have to pay someone to use that truck for that time period.

  4. Money as a Tool Read Passage Pg. 303 • Now, if a business needs money to expand, they can pay someone to use their money for a certain time period. • What a person pays to rent money from someone is what we call? INTEREST

  5. When to use your MoneyTool • When borrowing money, it is key for a business to make sure that the return on their investment is greater that the cost. • Example: • The annual interest rate on a $1000 loan is 10%. • A company anticipates a return of $95 per year on a $1000 investment • What will the company do?

  6. When to Invest • The company’s cost of making the $1000 investment is $100 per year. • The company would need a return of more than 10%, or $100, to benefit from the investment. • Example: If the interest rate on a $1000 loan drops to 6%, and the Company expects a return of $95 on a $1000 investment, what should the Company do?

  7. Federal Funds Rate • This is the amount of interest that the Federal Reserve charges banks to borrow money from the government. • The current Federal Funds Rate is: 5.25%

  8. Importance • The Importance of the Federal Funds Rate is for a bank or investment firm to be profitable, it must make a return that is higher than the Federal funds rate.

  9. Your Project • The goal of your investment proposal should be a return of over 5.25% • Why? • To be sure of a return at this rate, an investor should diversify.

  10. Diversify • Why Diversify? • So if one investment underperforms or fails, other investments can take up the slack • There are many ways to invest your money.

  11. Options • What are some common investment options that you have: • Commercial Property investment: retail centers, franchises, commercial vacant land. • Residential Property Investment: town homes, condos, residential homes. • Precious Metal : Platinum, Silver, Gold. • Conservative Investments : Bonds, Treasury Bills, Corporate Bonds, Savings, CD’s. • Stock Market : Indexes, Ritz Indexes, Individual Stocks, Mutual Funds. • Art and Antiques • These are the investment options you will need to research and report on. Now go to this Link for a basic overview of investment strategies.

  12. Contents • Link – Yahoo Finance • http://finance.yahoo.com/education/begin_investing • Brue, Stanley and McConnell, Campbell. Economics: Principals, Problems, and Policies. 6th Ed. McGraw-Hill. New York 2005 • http://books.google.com/books?id=hObpeG6v1VsC&pg=PA303&lpg=PA303&dq=irving+fisher+time+value+of+money+masseur&source=web&ots=7DcFA9w0sL&sig=TBKYTdBDcU4BwFjToFDdiSLtpzs#PPA261,M1 • Various Google Image searches and Google Book Searches

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