Credit

Friday May 31, 2013 – Periods 2, 3, 6, 7

What is credit? Credit means obtaining the use of money that you do not have To obtain credit you convince someone, usually a financial institution like a bank, savings and loan, credit union, or a credit card company, to provide a loan to you in return for your promise to pay the borrowed money back plus interest. Some people are afraid of using credit. Other people are fearless about using credit. Used in a good way, credit can be a tremendous help to you now and in the future. Used in a bad way, credit can result in harassment from creditors, broken relationships, and bankruptcy.

When approving a loan to an individual, lenders look for the “Three Cs”: character, capacity, and collateral. Character refers to your history of credit use is found in your credit report. Capacity examines the applicant’s income to see if the borrower can comfortably make the payments on the loan amount requested. Collateral is to secure a loan and can be used to repay the debt in case the borrower defaults on the loan.

State and federal laws are designed to protect credit consumers from dishonest business practices. Two of the more important consumer-credit protection laws are the Truth in Lending Act and the Fair Credit Reporting Act. Then there are the scheme artists and swindlers who prey on people’s greed or financial fears.

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Big Risk Simulation

Thursday May 30, 2013 – Periods 2, 3, 6, 7

The decision to buy insurance depends on individual judgment about the future. The general guideline is not to allow a large portion of potential loss to remain uninsured.

You have just graduated and you are single. You own a number of assets that you are thinking of insuring, including an automobile, inherited jewelry, a rare coin set, and the contents of your rented apartment. Your employer provides a health insurance plan you can purchase. Examine the cost and the risk of each of the things you would like to insure. Do not spend more than $2,900. You may spend less.

The simulation represents five years. A card will be pulled from a deck of cards and the number represents the item or items affected by the unexpected events during that particular year. For example, if a “6” is selected, the following insurances are affected: automobile, health, and disability.

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Insurance

Wednesday May 29, 2013 – Periods 2, 3, 6, 7

As people begin to earn an income and acquire assets, they begin to think about how to protect what they have against the risk of financial loss. Insurance is usually not regarded as a hot topic, but that may be changing. The ongoing debates about how best to provide health insurance to American families that do not currently have coverage illustrate the importance of this topic.

Understanding insurance begins with understanding risk. Life is filled with risk. Virtually every decision involves risk, some more than others. The purpose of insurance is to spread risks out over many people. Fundamentally insurance companies work by charging a fee (a premium) paid by customers to provide protection against certain types of loss. The fee or premium covers the losses and also the costs of operating the business and earning a profit.

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Reading Assessment – part 2

Tuesday  May 28, 2013

Studying1

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Reading Assessment – part 1

Thursday May 23, 2013 – Periods 2, 3, 6, 7

owl studying

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Investment Options

Wednesday May 22, 2013 – Periods 2, 3, 6, 7

We invest in a variety of financial assets, including savings accounts, government bonds, corporate bonds, stocks, and mutual funds. Each has its own level of risk and expected reward. You will learn about the five types  of investing risks and then compare the risks and rewards of several of the most frequently used types of investments.

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Investing

Tuesday May 21, 2013 – Periods 2, 3, 6, 7

We invest money in everything from rare coins to real estate because we expect a favorable financial return in the future. However, not all investments turn out as we hope and expect. Nearly every kind of investment involves some sort of risk. For example, the price of rare coins or houses can go down as well as up. Generally, there is a strong relationship between risk and reward. The higher the potential reward an investment offers, the higher the risk of losses rather than gains. Therefore, in choosing what to invest in it is important to weigh the various risks against the potential rewards.

You don’t need to take great risks to ensure a safe return on your investments—if you are patient. You can invest your money conservatively and let the passage of time increase its value. The trick is to take advantage of the power of compounding. Compounding refers to the ability of an investment to generate earnings that can be reinvested to earn still more earnings. Banks make this happen when they pay depositors compound interest, rather than simple interest, on their savings. Compound interest is interest paid not only on the original amount deposited in the savings account, but also on all interest earned by those savings.

Suppose you left your savings in the bank to compound year after year. In time, you would double your investment. But how long would this take? To find out, you could use the rule of 72. This rule says to divide the number 72 by the annual rate of return on the investment. The answer is the number of years it will take to double the original investment.

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