Unit: Savings and Investing

Review:Write this down or make a note

Key Concepts

• Interest = Principal x rate x time• Fixed versus variable rates• Liquidity – how accessible your money is to you• Savings: passbook, share account, CD, money

market account, Holiday clubs, etc• Can you earn interest on checking accounts?• APR- interest rate stated as a yearly rate of

return

Continued

• Which account is best for you:– Constant access- use a passbook or share account– Limited access- holiday or money market account– Future access- possibly a CD, watch the market

conditions and interest rates• Savings amount 10%• Emergency fund 4- 6 months of living

expenses (savings, share, money market account) needs to be liquid

Vocabulary

• Simple Interest- based on one year calculations: I = P x R x T

• Compound Interest- principal plus interest reoccurring calculations (more than once a year)– Daily, monthly, quarterly, semi-annually,

• Rule of 72- What does it say• Rule of 115 – what does it say• Peaco’s Rule- ???

Investing review

• Stocks and mutual funds difference• Which one is more risky?• Calculations of gain or loss• Stock price x number of shares • Selling price x number of shares• Calculate difference• Percentage increase or decrease • N- 0 / O

Example

• 100 shares of IBM stock purchased for $10 per share, sold all 100 shares a year later for $12 per share (assume no broker’s fees)

• 100 x 10 = 1000• 100 x 12 = 1200• 200 profit• N- O / O • 1200 – 1000 / 1000 = • 200/1000 = .20 x 100 = 20% increase (gain)