Lecture 9 saving investment and the financial system

1. Macroeconomics
Lecture 9
Saving, Investment, and the
Financial System

2. Questions

3. In Class Quiz 3 Name ___________________
1. Name two ways to raise financial capital for your
business.
2.What did Hans Rosling’s grandmother consider the
most important invention?
3. How many data points were plotted in the 200
countries in 200 years video?
4.What is more generally more risky, stocks or bonds?
5.What has a higher potential profit, stocks or bonds?
Borrow or Sell Shares - Bonds or Stock - Debt or Equity
Washing Machine
Gave freedom to develop human capital
120,000
Stocks
Stocks

4. gapminder.org
Hans Rosling

5. Stock Markets
NewYork
Stock Exchange
National Association of
Securities Dealers
Automated Quotations

6. May 17, 1792
2,400 Listed Companies
NewYork Stock Exchange

7. February 4, 1971
3,060 Listed Companies
National Association
of Securities Dealers
Automated
Quotations

8. StockValuation
Share Price
Dividend
Price-Earnings Ratio

9. Share Price
Every time a share sells
it sets the current price
Share prices can go up
and down with every
sale

10. Dividend
Company Earnings or
Profits
Declare dividend
Keep - Retained Earnings

11. Dividend
Earnings: 500
Dividend: 300
Retained Earnings: ?

12. Price - Earnings Ratio
P/E Ratio
Current Share Price
divided by
Earnings last year

13. P/E Ratio
Current Share Price: 75
Earnings last year: 5
P/E Ratio: ?

14. P/E Ratio
Price
Last Sale
Earnings
Last 12 months
P/E
Ratio
Equation
Earnings x P/E
Ratio
Price ÷ P/E Ratio Price ÷ Earnings
Apple $117 $8.62
Google $786 30.02
Facebook $2.12 60.87
13.57
$26.19
$129

15. Stock Bond

16. Stock
Price $111.95
Market Cap $94.13 B
P/E Ratio 21.33
Earnings 4.68%
Retained
Earnings
1.32%
DividendYield 3.36%

19. Bond

20. More Time = More Risk

21. More Time = More Risk

22. Bond
2018
Yield to Maturity
1.43%
U.S Treasury 2yr
0.86%
Spread
0.57%
spread = subject - treasury
0.57% = 1.43% - 0.86%

23. U.S.Treasury
McDonalds Bond
McDonalds Stock
0.86%
1.43%
3.36%
More Risk = Higher Rate
Yield

24. Financial Intermediaries
Banks
Mutual Funds

26. Banks
Savers
Borrowers
Investors
Bank Pays
5%
Bank Charges
7%
Make money
on spread
7% - 5% = 2%

27. We are rich today
because
people yesterday
were willing to save
and not consume

28. I only have $100
can I still invest in the
stock market?

29. Mutual Funds
Allows small investors
to pool and diversify
their savings

30. $115 $770 $115
small
savers
$100
Mutual Fund - $1,000
small
savers
$100
small
savers
$100
small
savers
$100
small
savers
$100
small
savers
$100
small
savers
$100
small
savers
$100
small
savers
$100
small
savers
$100