Evaluating Education, Work and Business

Vocabulary: Goal: something an individual wishes to

accomplish in the future Interest Rate: money paid for the use of

money, expressed as a percentage per unit of time

Investment: something into which one puts money, time, or energy with the hope of gaining a profit or satisfaction, in spite of risks.

Vocabulary (Continued) Percentage: a given part of a hundred

Example 18 out of 100 = 18% Rate of Return: the return on an investment,

expressed as a percentage of the amount invested

Risk: the chance of loss Rule of 72: formula for finding out how long it

will take an investment to double in value. Sweat Equity: time and effort with no pay put

into a business

What is a Percentage?

Find the following percentages: 1. 25 cookies of 100

2. 4 tires of 8

3. 46 pennies out of $1

4. 3 slices of pizza out of 12

5. 14 salted pretzels out of 39

Which is Better?

1. Profits of $250 on an investment of $400 or…$1,500 on an investment of $10,000.

2. 20 traffic accidents out of 2,000 deliveries or…5 traffic accidents out of 125 deliveries.

Return on Investment (ROI)

You invested $5 and earned $15 more than you started with. What is your ROI?

Net ProfitInvestment X 100 = ROI

Risk vs. Return

Return or Net Profit: How much money are we making.

Rates of Return: Bank Saving Rate, Loan Interest Rate, Return on Investment, etc.

What would you do?

Would you prefer investing in a company where you get your money back at the end of the week or at the end of the month?

Would you prefer investing $100 in a company where you would get $110 at the end of the week or $150 at the end of the month?

Risk vs. Return

Interest Rates:

Savings Account Car Loan House Loan (Mortgage Rates) Credit Cards

Why are credit card rates higher than car loans?

Why are stock return rates generally higher than savings rates?

Why are bank loan rates higher than savings rates?

Risk/Return Relationship

Lower Risk

Higher

Return

Rule of 72

Growth Rate Years to “Double”

4% 18 years

6% 12 years

8% 9 years

10% 7.2 years

12% 6 years

72/Interest Rate