Family Financial Analysis Coa4041 Study Guide
COA 4131 Test 3 Study Guide (Chapters 11-16)
• Chapter 11: Fundamentals of Investing: o Did you know?
• In 1637, in the Netherlands, a singe tulip bulb was worth the cost of the best house in Amsterdam
• 100 shares of AT&T purchased in 1983 at a cost of $16140 is now worth about $74562, representing a 17.7% annual return o Investments: commitment of funds to achievement of long term goals
• Purpose of investment: individuals invest to make money
• Importance of investment: to build wealth and security.
• In recent years it has become more critical because: o Of rising prices (inflation) o Salary raises are barley keeping inflation o People are living longer, so money has to last longer o Of worries that social security wont exist by the time will be needed o Of the turn toward self directed retirement plans
• Preparations for Investing: to have a stabilized life, net worth estimates, regular savings, no credit card debt, and an employee sponsored retirement plan
• 4 Steps in Investing:
• Setting goals/developing investment attitudes: o *One of the most important factors affecting goals is current income (for students, its different)
• Short term goals: 0-3 years long
• Long term goals: 7+ years
• Midterm Goals: 3-7 years o Questions to help in setting goal:
• What do I really want? How much will it take to get there? How much money do I have? How much risk can I take? Am I willing to give up things I want now to live better in the future? I can realistically expect?
• Assessing Risk and Return: o Once goals are set, this revolves around 3 questions:
• How long do you plan to invest? Refers to investment horizons
• What amount of expected return are you aiming for? Refers to expected returns
• How do you feel about risk? Refers to the change of loss and perhaps significant loss o Investment Horizon: the length of time you plan to invest o Expected returns: anticipated future returns o Current income: money received form investment
• Chapter 11: Fundamentals of Investing: o Did you know?
• In 1637, in the Netherlands, a singe tulip bulb was worth the cost of the best house in Amsterdam
• 100 shares of AT&T purchased in 1983 at a cost of $16140 is now worth about $74562, representing a 17.7% annual return o Investments: commitment of funds to achievement of long term goals
• Purpose of investment: individuals invest to make money
• Importance of investment: to build wealth and security.
• In recent years it has become more critical because: o Of rising prices (inflation) o Salary raises are barley keeping inflation o People are living longer, so money has to last longer o Of worries that social security wont exist by the time will be needed o Of the turn toward self directed retirement plans
• Preparations for Investing: to have a stabilized life, net worth estimates, regular savings, no credit card debt, and an employee sponsored retirement plan
• 4 Steps in Investing:
• Setting goals/developing investment attitudes: o *One of the most important factors affecting goals is current income (for students, its different)
• Short term goals: 0-3 years long
• Long term goals: 7+ years
• Midterm Goals: 3-7 years o Questions to help in setting goal:
• What do I really want? How much will it take to get there? How much money do I have? How much risk can I take? Am I willing to give up things I want now to live better in the future? I can realistically expect?
• Assessing Risk and Return: o Once goals are set, this revolves around 3 questions:
• How long do you plan to invest? Refers to investment horizons
• What amount of expected return are you aiming for? Refers to expected returns
• How do you feel about risk? Refers to the change of loss and perhaps significant loss o Investment Horizon: the length of time you plan to invest o Expected returns: anticipated future returns o Current income: money received form investment