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  • Chapter 11: Retirement & Estate Planning
  • Chapter 12: Investing
  • Chapter 14: The Practice of Investment
  • Read information posted in Content and Articles folder.


  • Chapter 11: 11.2 #2 (p. 276)
  • Chapter 12: 12.3 #4 (p. 305)
  • Chapter 14: 14.1 #1 (p. 340)

Chapter 11

1. Do you participate in an employer-sponsored retirement savings plan? If so, what kind of plan is

it, and what do you see as the benefits and drawbacks of participating? If you contribute to your

plan, how did you decide how much to contribute? Could you contribute more? In searching for

your next good job, what kind of retirement plan would you prefer to find in the new employer’s

benefit package, and why?

2. As part of your planning, how can you estimate what you can expect from Social Security as a

contribution to your retirement income? Find this answer by going

to Using the menus at this site, find out your retirement age. How

many credits toward Social Security do you have now? How many do you expect to accumulate

over your working life? Use one of the benefit calculators to find your estimated Social Security

benefit. How much could you receive monthly? Would you be able to live on your Social Security

alone? How much more would you need to save for? What would happen if you continued to work

or went back to work after taking your retirement benefit? What would happen if you took your

benefit before your full retirement age?

Chapter 12

Selecting a security to invest in, such as a stock or fund, requires analyzing its returns. You can

view the annual returns as well as average returns over a five-, ten-, fifteen-, or twenty-year

period. Charts of returns can show the amount of volatility in the short term and over the longer

term. What do you need to know to calculate the annual rate of return for an investment?

Consider that at the beginning of 2010 Ali invests $5,000 in a mutual fund. The fund has a gain in

value of $200, but generates no income. What is the annual percentage rate of return? What do

you need to know to estimate the expected return of an investment in the future? If the fund Ali

invests in has an average fifteen-year annual return of 7 percent, what percentage rate of return

should he expect for 2011? Find the estimated annualized rate of return for a hypothetical

portfolio by using the calculator at

Saylor URL:


2. Try the AARP’s investment return calculator

at, experimenting with

different figures to solve for a range of situations. Use the information on that page to answer the

following questions. Can the future rate of return on an investment be estimated with any

certainty? Do investments that pay higher rates of return carry higher volatility? Do investments

that pay higher rates of return carry higher risk? What accounts for differences between the

actual return and the expected return on an investment?

3. The standard deviation on the rate of return on an investment is a measure of its volatility, or

risk. What would a standard deviation of zero mean? What would a standard deviation of 10

percent mean?

4. What kinds of risk are included in investment risk? Go online to survey current or recent financial

news. Find and present a specific example of the impact of each type of investment risk. In each

case, how did the type of risk affect investment performance?

12.4 Diversification: Return with Less Risk

Chapter141. What four measures are the most important indicators of the health of the economy? What are

the other leading economic indicators? Go to a financial news source to find out the status of all

the economic indicators at this time. Make note of your findings and the date for purposes of

comparison. How does the information inform you as an investor? Discuss with classmates the

implications of the economic indicators for investing. For example, read the results of the most

recent Consumer Confidence Survey athttp://www.conference-

Saylor URL:

341 How might these survey results inform you as

an investor?

2. Read an article summarizing the index of leading economic indicators for May 2009

at How might an

investor have used the reported information in making investment decisions? Survey the indexes

listed in Figure 14.2 “Examples of Security Indexes”. What role might each index play in choosing

assets for a portfolio?

3. Visit the SEC’s EDGAR site at Take the tutorial to familiarize

yourself with how the site works and then click on “Search for Company Filings.” Input the name

of a company with publicly traded stock of interest to you. Then click on the company’s most

recent annual report it filed with the SEC. Read the annual report in its entirety, including parts

you don’t understand. Jot down your questions as you read as if you are thinking of buying shares

in that company. What information encourages you in that decision? What information raises

questions or concerns? Go to the company’s Web site and check its online documents, news,

updates, and the current status of its stock. Are you further encouraged? Why or why not? Where

can you go next to get data and commentary about the company as an investment opportunity?

4. Survey the news sources listed in Figure 14.4 “Sample of Financial News Sources” and number

the sites to rank them in order of their usefulness to you at this time. Record in your personal

finance journal or My Notes your top five sources of financial information and why you chose


5. Have you ever mistaken a press release or a blog for hard news when looking for information

online? Read the interviews with journalists, bloggers, and others debating the reliability and

accuracy of news disseminated through the Internet

at This PBS Frontline

special delves into the questions of the credibility and reliability of news information, including

financial news and blogs that we access online. Commentators include Ted Koppel, Larry Kramer,

Eric Schmidt, Craig Newmark, and others. Discuss with classmates the positions taken in this

debate. In My Notes or your personal finance journal, write an essay expressing your own

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