Housekeeping

1
Housekeeping

• The following assignments were due for our
  international unit
• Economic political cartoons w/ questions
• Corrections for the quiz
• Chapter 4 questions and vocab from the EOCT book
• Sugar research
• Current event March 23
• Tree map on trade barriers
• Exchange rate homework (unit 7 lesson 42)
• Free trade vs. protectionism presidential speech

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Sponge Monday, November 13

• What expense line item was the largest in the
  budget that you created on Friday?

3
Sponge Check! Monday, April 11

• Write two quiz questions for international
  economics one multiple-choice and one
  Jeopardy-style. Make them good!

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1. On May 29, 2001, how much American money would an
   importer receive in exchange for one British
   pound?
2. On the same day, how many Euros would exporters
   receive for each American dollar they exchanged?

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Personal Finance
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• SSEPF2 The student will explain that banks and
  other financial institutions are businesses that
  channel funds from savers to investors.
• a. Compare services offered by different
  financial institutions.
• b. Explain reasons for the spread between
  interest charged and interest earned.
• c. Give examples of the direct relationship
  between risk and return.
• d. Evaluate a variety of savings and investment
  options include stocks, bonds, and mutual funds.
  

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Banks and Financial Institutions

• Banks and financial institutions are businesses
  that channel funds from savers to investors

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Commercial Banks

• Functions/services offered
• Receive deposits of money
• Extend credit
• Credit cards
• Provide loans
• Checking and savings accounts
• Debit cards
• Structure
• Similar to corporations with stockholders who own
  and manage banks for a profit
• Main source of income
• Interest and fees charged on loans

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Commercial Banks, continued

• In the event of a bank failure, your money is
  protected as long as the bank is insured by the
  Federal Deposit Insurance Corporation (FDIC).
• Any lending institution will require some kind of
  collateral to secure a loan
• Collateral is anything of value that could be
  used to cover the value of the loan in the event
  the borrower is unable to repay the loan
• E.g., the bank takes your house as collateral for
  a mortgage and your car serves as collateral for
  a car loan

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Credit Unions

• Functions/services offered
• Receive deposits of money
• Extend credit
• Provide loans
• Checking and savings accounts typically offer
  higher interest rates on deposits because they
  pay lower taxes than banks
• Structure
• Cooperative associations that serve only their
  members members own and control C.U.
• Main source of income
• Interest and fees charged on loans

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Savings and Loan Associations

• Savings institutions designed to aid
  home-building and savings
• Deposits are not as easily accessible, but rates
  of return are higher
• Focuses on mortgages

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Payday Loan Company

• Short-term loans made based on a borrowers
  future paycheck
• Typically much higher interest rates than banks
• Fees are extremely high up to 17.50 for every
  100 borrowed
• Interest rates 911 for a one-week loan 456
  for a two-week loan, 212 for a one-month loan.

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• SSEPF2 The student will explain that banks and
  other financial institutions are businesses that
  channel funds from savers to investors.
• b. Explain reasons for the spread between
  interest charged and interest earned.

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Interest Charged vs. Interest Earned

• Banks pay depositors interest on the money they
  deposit as savings
• Banks charge borrowers interest on the money they
  borrow
• In order to make a profit, the banks must charge
  a higher interest rate to borrowers than the rate
  they pay their depositors

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Sponge Tuesday, April 17

1. Would you rather save your money in an account
   that earns simple interest or compound interest?
2. Who has the comparative advantage in coats,
   according to the table below?

  Coats Shoes
United States 25 50
Canada 5 10
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• SSEPF4 The student will evaluate the costs and
  benefits of using credit.
• c. Explain the difference between simple and
  compound interest rates.

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Simple vs. Compound Interest

• Interest is the amount of money (usu. expressed
  as a percentage) that a lender charges a borrower
  in exchange for the use of their money
• As a borrower, you pay interest when you repay a
  loan in addition to repaying the principal amount
  of your loan
• As a saver, the bank pays you interest when you
  deposit money in a checking or savings account
• There are two types of interest simple and
  compound

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Simple Interest

• Simple interest is a rate that is applied only to
  the value of the principal (the amount of money
  originally borrowed)
• E.g., on a 10,000 loan with 5 interest, your
  annual interest payment will always be 500
  (10,000 x 5)
• E.g., on a 10,000 savings account earning 5
  interest, you will earn 500 each year in
  interest (10,000 x 5)

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Compound Interest

• Compound interest is applied to both the
  principal and the accrued interest
• E.g., on a 10,000 loan with 5 interest, your
  annual interest payment will be 500 at the end
  of year 1 (10,000 x .05). Your balance at the
  end of year 1 will be 10,500
• In year 2, your interest will be calculated on
  the principal plus the earned interest from year
  1 (10,000500) x .05 525. Your balance at the
  end of year 2 will be 11,025
• In year 3, your interest will be calculated on
  the principal plus the earned interest from year
  1 and 2 (10,000500525) x .05 551.25. Your
  balance at the end of year 2 will be 11,576.25

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Compound v. Simple Interest
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VE 4 Video re. Compound Interest
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Work Period Thursday, April 12

• Create a double-bubble comparing stocks and
  mutual funds
• Create a tree map comparing the different kinds
  of financial institutions, then write a paragraph
  about how you would use those institutions as a
  college student and as a worker in your first job

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• SSEPF2 The student will explain that banks and
  other financial institutions are businesses that
  channel funds from savers to investors.
• c. Give examples of the direct relationship
  between risk and return.

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Risk and Return

• Return is the eventual payoff you receive from an
  investment
• Risk is the chance that an investment might end
  up losing money rather than making it

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Risk and Return, continued

• The general rule of thumb The greater the risk,
  the greater the possible return the lower the
  risk, the lower the return
• BIG QUESTION How much risk can you afford?
• If you make an investment and it fails causing
  you to lose all of your money invested, will you
  still be financially okay?

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Stocks, Bonds and Mutual Funds

• Stocks shares in a company that an individual
  or organization purchases that give the person or
  organization a partial ownership interest in the
  company
• Selling stocks is one way for companies to
  finance their business (i.e., to raise money)
• Purchasing stocks is a way for individuals or
  organizations to invest their money
• Stocks are risky by nature
• Investors in Enron lost a lot of money
• Early investors in MicroSoft or Apple made a lot
  of money

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Stocks, Bonds and Mutual Funds

• Bonds are loans to a company or a government,
  therefore they offer a lower rate of return
• Issuing bonds is another way for a company or
  government to raise money
• Purchasing bonds is another way for individuals
  or organizations to invest their money
• No ownership interest is transferred in the sale
  of a bond

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Stocks, Bonds and Mutual Funds

• Mutual funds pool money from a number of
  investors to buy a range of stocks
• Risk is reduced because the investment is spread
  among several companies (diversification) if one
  fails, it is likely that others will succeed
• Risk is reduced because mutual funds are managed
  by financial experts
• Downside of mutual funds is that the return is
  typically lower and investors must pay some kind
  of fee to the fund manager

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Sponge Tuesday, November 15

• What are some of the reasons you might save your
  money as a high school student? What reasons
  might you have to save as someone with a new
  family?

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Reasons People Save

1. Savings increase when interest rates are high
   (higher return outweighs the loss of immediate
   gratification of a purchase)
2. Large purchases, e.g., house, car, vacation
3. Big life events, e.g., having a baby, college,
   retirement

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Housekeeping Stuff

• Due at the beginning of class on Thursday
• Budgeting scenarios (Ned Worth, Dudley Dropout,
  etc.) including at least one paragraph on your
  persons short-, medium- and long-term savings
  needs
• Webquest budget with all questions answered
• EOCT Chapter 1 vocabulary (bold words only) and
  questions (write out question and correct answer)
• I need signed progress letters ASAP
• Dont forget to do practice tests on USA Test
  Prep!

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• SSEPF4 The student will evaluate the costs and
  benefits of using credit.
• a. List factors that affect credit worthiness.
• b. Compare interest rates on loans and credit
  cards from different institutions.

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Credit Worthiness Should a bank lend you money?

• Banks look at several factors to determine
  whether a borrower is likely to pay back a loan
• Credit score a standardized number based upon an
  individuals history as a borrower. Making
  monthly payments and paying bills on time will
  earn you a good credit score. Loan defaults or
  late payments low credit score.
• Salary/wages and savings
• Property for collateral
• Existing debts

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Credit Worthiness Should a bank lend you money?

• A high credit score and strong credit-worthiness
  will increase the chances of you getting a loan
  at a favorable interest rate
• A low credit score or other negative factors will
  result in a higher interest rate because banks
  perceive you as a greater risk of default (or you
  might be denied the loan all together)

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Do I Have a Deal for You . . .

• What kinds of enticements will companies use to
  get new credit card customers?
• Can credit-card rewards affect a persons
  spending decisions?

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Work Period Tuesday, April 17

• Review worksheets

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Sponge Wednesday, April 18

1. What are the different features or terms on
   credit cards that might be available from various
   companies?
2. What kinds of insurance do you think are
   available to consumers and businesses?
3. Higher demand for U.S. exports will typically
   result in
4. an increase in the international value of the
   dollar
5. an increase in the international value of foreign
   currencies
6. an increase in the trade deficit of the United
   States
7. an increase in the price of foreign-produced
   goods in U.S. markets

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• Your last current event is due this Friday. Make
  it a good one (yes, there can be good current
  events related to economics)everyone will have
  to discuss their event.

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Housekeeping Stuff

• Saturday School April 28. Zap zeroes!
• EOCT Cram Jam Saturday, May 5, 900 to 100
• Everyone needs to attend this sessionclear your
  calendars!
• Parent-teacher conference night this Thursday
  from 500 700.
• 200 class-participation points if your parent
  comes by themselves an additional 100 points if
  you come with your parent
• Tutorials Mon Fri 330-430 Tues Thurs
  420-500 before school as needed

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• SSEPF5 The student will describe how insurance
  and other risk-management strategies protect
  against financial loss.
• a. List various types of insurance such as
  automobile, health, life, disability, and
  property.
• b. Explain the costs and benefits associated with
  different types of insurance include
  deductibles, premiums, shared liability, and
  asset protection.

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Insurance

• Insurance involves transferring risk to others.
• Insurance provides financial coverage if an
  insured item is lost or damaged
• Protects policyholders and their beneficiaries
  from financial devastation

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Types of insurance

• Life Pays money to a beneficiary on the death of
  an insured insured pays monthly premiums
• Health/medical Covers health and medical
  expenses
• Disability Provides a policy holder income in
  the event that they become disabled and cannot
  work

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Types of Insurance, continued

• Property insurance
• Homeowners insurance Covers a policyholders
  house in the event that it is damaged or
  destroyed
• Automobile insurance Liability and possibly
  collision
• Liability insurance Pays for damages incurred by
  another person if the policyholder is found
  financially liable for an accident
• E.g., auto liability, homeowners policy,
  comprehensive liability

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Insurance-related Terms

• Deductible The amount you have to pay
  out-of-pocket for expenses before an insurance
  company will cover the remaining costs.
• For example, lets say you have an auto insurance
  policy that has a 300 deductible. You are
  speeding out of the McNair parking lot one day,
  and because you havent learned to drive yet, you
  run into Mr. Owens car.
• If your medical expenses are 2,000 (the
  Illuminati rigged the accident), how much of your
  medical bill would you have to pay out of pocket?
• What if you got lucky and your medical bills were
  only 300 (your car ran over your own foot when
  you got out to see how bad you hurt Owens
  car)how much would you and the insurance company
  pay in that case?

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Insurance-related Terms

• Premium Monthly, quarterly or annual price paid
  for an insurance policy. The premium is paid by
  the insured party to the insurer, and primarily
  compensates the insurer for bearing the risk of a
  payout should the insurance agreement's coverage
  be required.
• Typically there is an inverse relationship
  between premiums and deductibles
• The higher your premium, the lower your
  deductible
• The lower your premium, the higher your
  deductible
• In your notes, write why you think this
  relationship is inverse. Also write why someone
  might choose to have a low-premium/high-deductible
  policy.

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Insurance-related Terms

• Asset protection A benefit from holding
  insurance that provides financial payments in the
  event of the loss of a covered asset. Also,
  insurance can protect other individual or
  business assets by providing a source of
  repayment in the event of a loss due to
  liability. (In other words, if you are sued for
  damages from a car wreck, your auto insurance
  policy can pay for the damages instead of you
  having to sell other assets to get the funds to
  pay.)

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Insurance-related Terms

• Purchasing insurance involves shared liability
  between the insurer and the insured.
• This means that the insurance company assumes a
  pre-determined amount of financial liability for
  a claim that the insured might file because the
  insured has paid premiums for the financial
  protection.

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Work Period Wednesday, April 18

• Complete Comparing Credit Card Offers
• Complete Tracking Your Spending
• Create a tree map on one of the following
• Various types of insurance (include automobile,
  health, life, disability, and property) include
  facts and examples of each
• Various types of financial or lending
  institutions that we discussed (commercial banks,
  credit unions, savings loans, payday loan
  company) include facts and examples of each
• Worksheets are due at the end of class
• Tree map is due first thing tomorrow

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Work Period Tuesday, Nov. 15

• Choose two of the following
• Create a tree map on the various types of
  investment options (include stocks, bonds, mutual
  funds and certificates of deposit (CDs))
• Create a tree map on various types of insurance
  (include automobile, health, life, disability,
  and property)
• Create a tree map on the various types of
  financial or lending institutions that we
  discussed (commercial banks, credit unions,
  savings loans, payday loan company)
• Create a double-bubble comparing banks and payday
  loan companies
• Create a double-bubble comparing stocks and
  mutual funds

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Sponge Thursday, April 19

• DO NOT MOVE MY DESKS!!!!
• What skills are required to be successful in the
  workplace? Name four.
• What kind of benefits would result from your
  investment in education, training, and skill
  development?
• What are the tools of monetary policy and who
  controls those tools?

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• SSEPF6 The student will describe how the
  earnings of workers are determined in the
  marketplace.
• a. Identify skills that are required to be
  successful in the workplace.
• b. Explain the significance of investment in
  education, training, and skill development.

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Housekeeping Stuff

• Saturday School April 28. Zap zeroes!
• EOCT Cram Jam Saturday, May 5, 900 to 100
• Everyone needs to attend this sessionclear your
  calendars!
• Parent-teacher conference night this Thursday
  from 500 700.
• 200 class-participation points if your parent
  comes by themselves an additional 100 points if
  you come with your parent
• Tutorials Mon Fri 330-430 Tues Thurs
  420-500 before school as needed

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Refresher on Monetary Policy

• What does DR RROMO stand for?

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Refresher on Monetary Policy

• Who controls monetary policy?

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• SSEPF3 The student will explain how changes in
  monetary and fiscal policy can have an impact on
  an individuals spending and saving choices.
• a. Give examples of who benefits and who loses
  from inflation.
• b. Define progressive, regressive, and
  proportional taxes.
• c. Explain how an increase in sales tax affects
  different income groups.

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The Impact of Fiscal Policy

• If the government raises taxes, the following
  will result
• Consumers are left with less income to invest and
  to spend in the marketplace, which leads to
• A decrease in inflation as a result of the
  decreased demand for products

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The Impact of Fiscal Policy, cont.

• When taxes are low, inflation increases because
  people have more money to spend so
• Producers can afford to raise their prices and
  still do well

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Effects of Inflation

• Whos Helped

• Whos Hurt

• Some people speculate in an attempt to take
  advantage of rising prices. They may buy luxury
  items or other expensive goods that are expected
  to increase in price. (Buy low, sell high)

• Creditors or lenders are hurt because loans that
  were made at the beginning of an inflationary
  period are repaid later with dollars that buy
  less
• People on fixed incomes

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Types of Taxes

• Progressive tax Any tax for which the amount you
  pay increases with income
• E.g., a progressive income tax means that someone
  who makes 100,000 probably pays more than a
  person who earns 30,000 (maybe 15 versus 5)

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Types of Taxes, continued

• Regressive tax People pay a higher percentage of
  tax the less money they make
• Sales taxes are regressive because people with
  lower incomes pay a higher percentage in tax
• If taxes on a new 10,000 car are 7 or 700,
  that amount will be a higher proportion of the
  income of someone who makes 20,000 per year than
  a person who makes 100,000
• Sales taxes, therefore, affect poorer people more
  than the wealthy

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Types of Taxes, continued

• 3. Proportional tax Everyone pays the same
  amount proportional to their income.
• E.g., a proportional income tax would require
  everyone to pay the same percentage of their
  annual income (say 10).
• Therefore, the millionaire would pay 100,000,
  the person earning 50,000 would pay 5,000, and
  the high-school grad earning 20,000 would pay
  2,000each pays the same proportion of their
  income but different amounts.

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Work Period

• Answer the questions in chapter 5 of your EOCT
  review book on pages 96, 100, 105, and 110 112.
• You must write the question and the correct
  answer.
• For multiple-choice questions, in addition to the
  correct answer you must prove that your answer is
  correct with a justification.

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Happy Friday!

• 1. What basic economic problem do both
  higher-income nations and lower-income nations
  have in common?
• A too many unskilled laborers
• B lack of capital goods
• C too much government
• D scarcity of resources
• Checkpoint today
• Current events discussion
• Individual progress-report reviews

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Closing Wednesday, Nov. 15

• On a sheet of paper, answer the following
  questions as a TOTD
• If the Fed lowers the reserve requirement, then
  Octavius, as a consumer, will be more likely to
• a. Buy a house c. Buy bonds
• b. Save his money d. Pay a high interest rate
• JeRontai owns a restaurant in Atlanta. He would
  probably like it if
• a. The Fed buys bonds c. Congress raises taxes
• b. Fed raises reserve reqt d. There was a higher
  discount rate