{"id":4865,"date":"2023-06-22T13:15:39","date_gmt":"2023-06-22T13:15:39","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/?post_type=chapter&#038;p=4865"},"modified":"2024-10-18T20:55:54","modified_gmt":"2024-10-18T20:55:54","slug":"retirement-planning-fresh-take","status":"web-only","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/chapter\/retirement-planning-fresh-take\/","title":{"raw":"Retirement Planning: Fresh Take","rendered":"Retirement Planning: Fresh Take"},"content":{"raw":"<section class=\"textbox learningGoals\">\r\n<ul>\r\n\t<li>Understand the fundamentals of Social Security benefits, including the eligibility criteria, benefit amounts, and strategies for claiming<\/li>\r\n\t<li>Assess the retirement benefits provided by their employer, such as 401(k) plans, pension plans, and other retirement savings options<\/li>\r\n\t<li>Differentiate between basic forms of investments, such as stocks, bonds, mutual funds, and real estate<\/li>\r\n<\/ul>\r\n<\/section>\r\n<h2>Social Security Benefits: Understanding the Fundamentals<\/h2>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p><strong>Eligibility requirements of social security:<\/strong> The criteria stipulates that typically [latex]40[\/latex] credits are needed, which is equivalent to approximately [latex]10[\/latex] years of work. These credits are based on your earnings, and the amount of earnings required for a credit changes from year to year. In 2023, for example, you earn one credit for each [latex]$1,410[\/latex] of wages or self-employment income, and you can earn up to four credits per year.<\/p>\r\n<p>The age at which one chooses to retire and start claiming benefits can significantly influence the amount received. You are entitled to your full retirement benefits at your full retirement age. Your <strong>full retirement age <\/strong>is dependent on the year of your birth.<\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<th style=\"text-align: center;\">Year of Birth<\/th>\r\n<th style=\"text-align: center;\">Full Retirement Age<\/th>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1942[\/latex] or earlier<\/td>\r\n<td style=\"text-align: center;\">[latex]65[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1943-1954[\/latex]<\/td>\r\n<td style=\"text-align: center;\">[latex]66[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1955[\/latex]<\/td>\r\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]2[\/latex] months<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1956[\/latex]<\/td>\r\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]4[\/latex] months<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1957[\/latex]<\/td>\r\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]6[\/latex] months<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1958[\/latex]<\/td>\r\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]8[\/latex] months<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1959[\/latex]<\/td>\r\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]10[\/latex] months<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center;\">[latex]1960[\/latex] and later<\/td>\r\n<td style=\"text-align: center;\">[latex]67[\/latex]<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>&nbsp;<\/p>\r\n<p>You can begin claiming benefits as early as age [latex]62[\/latex], doing so will permanently reduce your monthly benefit. For each year you delay claiming past your full retirement age (which ranges from [latex]66[\/latex] to [latex]67[\/latex], depending on when you were born), you earn delayed retirement credits, which increase your monthly benefit up to age [latex]70[\/latex].<\/p>\r\n<p>The amount of an individuals Social Security benefits are calculated based on an individual's <strong>average indexed monthly earnings<\/strong> (AIME). A person's <strong>average indexed monthly earnings (AIME)<\/strong> is a calculated average that summarizes up to [latex]35[\/latex] years of a worker's earnings, adjusted or \"indexed\" to reflect changes in general wage levels over the individual's working years.<\/p>\r\n<p>One calculated, a person's AIME is then put through a formula to compute the <strong>primary insurance amount<\/strong> (PIA). The <strong>primary insurance amount (PIA)<\/strong> is the benefit a person would receive if he\/she elects to begin receiving retirement benefits at his\/her FRA.<\/p>\r\n<\/div>\r\n<section class=\"textbox watchIt\"><iframe src=\"\/\/plugin.3playmedia.com\/show?mf=10356036&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=O3tMi0egVZE&amp;video_target=tpm-plugin-fh9q0yja-O3tMi0egVZE\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><br \/>\r\n<em>Note: The bend points in the video are for 2020 and are different from the bend points for 2023.<\/em><br \/>\r\n<br \/>\r\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/Heres+How+Much+Money+You%E2%80%99ll+Get+From+Social+Security.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cHere\u2019s How Much Money You\u2019ll Get From Social Security\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>\r\n<h2>Assessing Employer-Sponsored Retirement Benefits<\/h2>\r\n<h3>401(k)<\/h3>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong>A <strong>401(k)<\/strong> is a retirement savings plan offered by employers to their employees. It allows employees to contribute a portion of their pre-tax income to the plan, which grows tax-deferred until withdrawal during retirement. Contributions are often matched by employers up to a certain percentage. The funds in a 401(k) can be invested in a variety of options, providing the opportunity for growth over time.<\/p>\r\n<p>The two main types of 401(k) plans are <strong>traditional 401(k)<\/strong> and <strong>Roth 401(k)<\/strong>. In a traditional 401(k), contributions are made with pre-tax income, and withdrawals during retirement are subject to income tax. With a Roth 401(k), contributions are made with after-tax income, and qualified withdrawals in retirement are tax-free.<\/p>\r\n<\/div>\r\n<section class=\"textbox example\">Jameis signs up for his employer-based 401(k). The employer matches any 401(k) contribution up to [latex]7.5\\%[\/latex] of the employee salary. Jameis\u2019 annual salary is [latex]$72,800[\/latex].\r\n\r\n\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>What is the most money that Jamie can deposit that will be fully matched by the company?<\/li>\r\n\t<li>How much total will be deposited into Jameis\u2019 account if he deposits the full [latex]7.5\\%[\/latex]?<\/li>\r\n<\/ol>\r\n<p>[reveal-answer q=\"160916\"]Show Solution[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"160916\"]<\/p>\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>The employer will match up to [latex]7.5\\%[\/latex] of any employee\u2019s salary. [latex]7.5\\%[\/latex] of Jameis' salary is [latex]0.075\\times$72,800=$5,460[\/latex]. So Jameis can deposit up to [latex]$5,460[\/latex] and receive that amount in matching funds in his account.<\/li>\r\n\t<li>Jameis' contribution plus the company\u2019s contribution is [latex]$5,460+$5,460=$10,920[\/latex], which is the total that is deposited into Jameis' account.<\/li>\r\n<\/ol>\r\n<p>[\/hidden-answer]<\/p>\r\n<\/section>\r\n<section class=\"textbox watchIt\"><iframe src=\"\/\/plugin.3playmedia.com\/show?mf=10356037&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=KrmZDqorxB4&amp;video_target=tpm-plugin-q00q8t71-KrmZDqorxB4\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><br \/>\r\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/Everything+you+need+to+know+about+401(k)s.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cEverything you need to know about 401(k)s\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>\r\n<section class=\"textbox watchIt\"><iframe title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/Ovua8cC4LqY\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><br \/>\r\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/Roth+401k+Or+Traditional+401k+-+Which+Is+The+Better+Investment_.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cRoth 401k Or Traditional 401k - Which Is The Better Investment?\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>\r\n<h3>Pension Plans<\/h3>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p>A <strong>pension plan<\/strong> is a retirement benefit provided by employers that guarantees a specific income to employees upon retirement. It is typically based on a formula that considers factors like years of service and average salary. Pension plans are funded by contributions from employers and sometimes employees. The employer is responsible for managing the investments and assumes the risk. Pension payments are usually provided as a monthly income for the retiree's lifetime.<\/p>\r\n<\/div>\r\n<h2>IRA<\/h2>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p><strong>Individual Retirement Accounts (IRAs)<\/strong> are personal retirement savings accounts that offer tax advantages. They are typically opened by individuals to supplement their employer-sponsored retirement plans or for those who don't have access to such plans.<\/p>\r\n<p>IRAs allow individuals to contribute a certain amount of money each year, and the contributions may be tax-deductible depending on eligibility and type of IRA. The funds within an IRA can be invested in a variety of options, and earnings grow tax-deferred or tax-free, depending on the type of IRA. Withdrawals from IRAs are generally taxed and may be subject to penalties if taken before retirement age.<\/p>\r\n<p>The two main types of IRAs are <strong>traditional IRA<\/strong> and <strong>Roth IRA<\/strong>. In a traditional IRA, contributions may be tax-deductible, and earnings grow tax-deferred until withdrawals, which are then taxed as ordinary income. With a Roth IRA, contributions are made with after-tax income, but qualified withdrawals in retirement are tax-free.<\/p>\r\n<\/div>\r\n<section class=\"textbox watchIt\"><iframe src=\"\/\/plugin.3playmedia.com\/show?mf=10356035&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=l9TMesiI7SE&amp;video_target=tpm-plugin-lmn0nkqo-l9TMesiI7SE\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><br \/>\r\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/IRA+Explained+In+Less+Than+5+Minutes+%7C+Simply+Explained.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cIRA Explained In Less Than 5 Minutes | Simply Explained\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>\r\n<h2>Investing<\/h2>\r\n<h3>Distinguish Between Basic Forms of Investments<\/h3>\r\n<h4>Bonds<\/h4>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p><strong>Bonds<\/strong> are debt instruments issued by governments, municipalities, and corporations to raise capital. When an investor purchases a bond, they are essentially lending money to the issuer in exchange for regular interest payments and the return of the principal amount at maturity.<\/p>\r\n<p>Bonds are considered relatively safer investments compared to stocks as they offer a fixed income stream and are generally less volatile. The risk and return associated with bonds vary depending on factors such as the creditworthiness of the issuer, term length, and prevailing interest rates.<\/p>\r\n<\/div>\r\n<section class=\"textbox example\">Maureen invests [latex]$5,000[\/latex] in a bond with a maturity date in [latex]5[\/latex] years at a fixed coupon rate of [latex]4.75\\%[\/latex]. How much is Maureen paid each year and how much does she receive on the maturity date?[reveal-answer q=\"160936\"]Show Solution[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"160936\"]The coupon rate is [latex]4.75\\%[\/latex]. [latex]4.75\\%[\/latex] of their bond value is [latex]0.0475\\times$5,000=$237.50[\/latex]. After year [latex]1[\/latex], Maureen receives [latex]$237.50[\/latex]. They receive [latex]$237.50[\/latex] after years [latex]2[\/latex], [latex]3[\/latex], and [latex]4[\/latex]. In year [latex]5[\/latex], when the bond matures, Maureen receives [latex]$5,237.50[\/latex], (the interest for the year and the initial principal).<br \/>\r\n[\/hidden-answer]<\/section>\r\n<h3>Certificates of Deposit (CDs)<\/h3>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p>Certificates of Deposit (CDs) are financial products offered by banks and credit unions that provide a fixed interest rate for a specified period of time. When an individual purchases a CD, they deposit a specific amount of money for a predetermined term, ranging from a few months to several years.<\/p>\r\n<p>CDs are considered low-risk investments as they are insured by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. The interest earned on CDs is typically higher than traditional savings accounts, and the principal is returned at the end of the term. Early withdrawals from CDs may result in penalties.<\/p>\r\n<\/div>\r\n<section class=\"textbox watchIt\"><iframe src=\"\/\/plugin.3playmedia.com\/show?mf=11243201&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=LmWekTyGAHA&amp;video_target=tpm-plugin-vpcsl8ha-LmWekTyGAHA\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n<p>You can view the <a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/What+You+Need+To+Know+About+CDs+Certificates+of+Deposit.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cWhat You Need To Know About CDs (Certificates of Deposit)\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>\r\n<h3>Stocks<\/h3>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p><strong>Stocks<\/strong> represent ownership shares in a publicly traded company, offering individuals the opportunity to become partial owners. Investors who purchase stocks, known as shareholders, have the potential to benefit from the company's growth and profitability.<\/p>\r\n<p>Stock prices can fluctuate based on market conditions, company performance, and investor sentiment. Shareholders may receive dividends as a portion of the company's profits, and they have the ability to sell their shares in the stock market. Investing in stocks carries risks, including the potential loss of principal, but also offers the potential for capital appreciation.<\/p>\r\n<\/div>\r\n<section class=\"textbox example\">\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>Find the percent yield for a stock with a price of [latex]$37.40[\/latex] and an annual dividend of [latex]$1.60[\/latex].<\/li>\r\n\t<li>Find the percent yield for a stock with a price of [latex]$73.22[\/latex] and an annual dividend of [latex]$2.41[\/latex].<\/li>\r\n<\/ol>\r\n<p>[reveal-answer q=\"160931\"]Show Solution[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"160931\"]<\/p>\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>Substituting the values for price, [latex]$37.40[\/latex], and annual dividend, [latex]$1.60[\/latex], we find the percent yield for the stock to be [latex]\\text{Yld}\\%=\\frac{\\text{annual dividend}}{\\text{share price}}\\times100\\%=\\frac{$1.60}{$37.40}\\times100\\%=4.28\\%[\/latex]\r\n<p><\/p>\r\n<\/li>\r\n\t<li>Substituting the values for price, [latex]$73.22[\/latex], and annual dividend, [latex]$2.41[\/latex], we find the percent yield for the stock to be [latex]\\text{Yld}\\%=\\frac{\\text{annual dividend}}{\\text{share price}}\\times100\\%=\\frac{$2.41}{$73.22}\\times100\\%=3.29\\%[\/latex]<\/li>\r\n<\/ol>\r\n<p>[\/hidden-answer]<\/p>\r\n<\/section>\r\n<section class=\"textbox watchIt\"><iframe src=\"\/\/plugin.3playmedia.com\/show?mf=10356034&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=r6EuvZCJl7g&amp;video_target=tpm-plugin-07tgq67q-r6EuvZCJl7g\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><br \/>\r\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/How+to+Read+a+Stock+Summary+-+Learn+to+Trade+Stocks.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cHow to Read a Stock Summary - Learn to Trade Stocks\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>\r\n<section class=\"textbox example\">Consider the stock table shown below, and answer the questions based on the table.\u00a0<br \/>\r\n\u00a0 <img class=\"aligncenter size-full wp-image-4972\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207.png\" alt=\"A census graph. The key data factors. The x-axis ranges from 10 am to 3 pm in increments of 1 and the y-axis ranges from $30 to $30.75 in increments of 0.25. An increasing and decreasing curve is graphed. The factors are: Open: $30.42, 52 week range: 30.05 - 56.28, Shares outstanding:4.11 B, beta:1.21, P\/E ratio: 6.57, yield: 4.77 percent, Ex-dividend date: August 4, 2022, percentage of float shorted: 1.54 percent, Day range:30.05 \u2013 30.68, Market cap: $124.66 B, Rev. per employee: $606.06 K, E P S: $4.66, Short interest: 63.38 M, Average volume: 39.01 M. The performance for 5 days, 1 month, 3 months, Y T D, and 1 year are minus 3.92, minus 13.29, minus 25.61, minus 40.45, and minus 42.75 percent.\" width=\"998\" height=\"932\" \/>\r\n<p>&nbsp;<\/p>\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>What is the current price for Intel Corp on this date?<\/li>\r\n\t<li>What is the [latex]52[\/latex]-wk high? [latex]52[\/latex]-wk low?<\/li>\r\n\t<li>When is the dividend expected?<\/li>\r\n\t<li>What is its yield?<\/li>\r\n\t<li>What is the earnings per share?<\/li>\r\n<\/ol>\r\n<p>[reveal-answer q=\"160932\"]Show Solution[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"160932\"]<\/p>\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>Looking at the table, the current price of a share is [latex]$30.68[\/latex].<\/li>\r\n\t<li>The high was [latex]$56.28[\/latex], and the low was [latex]$30.05[\/latex].<\/li>\r\n\t<li>August 4, 2022<\/li>\r\n\t<li>[latex]4.77\\%[\/latex]<\/li>\r\n\t<li>The EPS value is [latex]$4.66[\/latex].<\/li>\r\n<\/ol>\r\n<p>[\/hidden-answer]<\/p>\r\n<\/section>\r\n<section class=\"textbox example\">Yulia owns [latex]300[\/latex] shares of stock in YYZ company. It pays [latex]$1.12[\/latex] per share this quarter. How much did Yulia earn this quarter on stock in YYZ?[reveal-answer q=\"160933\"]Show Solution[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"160933\"]<br \/>\r\nEach share pays [latex]$1.12[\/latex], so Yulia earns [latex]300\\times$1.12=$336.00[\/latex].[\/hidden-answer]<\/section>\r\n<section class=\"textbox example\">Serenity buys [latex]200[\/latex] shares of stock in UUK company for [latex]$9.76[\/latex] per share. At the end of the year, she sells those stocks for [latex]$10.02[\/latex] per share.\r\n\r\n\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>How much money did Serenity make?<\/li>\r\n\t<li>What was her return on investment for that one year?<\/li>\r\n<\/ol>\r\n<p>[reveal-answer q=\"160934\"]Show Solution[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"160934\"]<\/p>\r\n<ol style=\"list-style-type: decimal;\">\r\n\t<li>Serenity spent [latex]$9.76[\/latex] per share to buy the stock. The total she spent on the stock was [latex]$9.76\\times200=$1952.00[\/latex]. When she sold the stock, the price was [latex]$10.02[\/latex], so she received [latex]$10.02\\times200=$2,004.00[\/latex]. She made [latex]$2,004.00\u2212$1952.00=$52.00[\/latex].<\/li>\r\n\t<li>Her return on investment was [latex]\\frac{\\text{Earnings}}{\\text{Original Price}}=\\frac{$52}{$1952.00}=2.66\\%[\/latex].<\/li>\r\n<\/ol>\r\n<p>[\/hidden-answer]<\/p>\r\n<\/section>\r\n<h3>Mutual Funds<\/h3>\r\n<div class=\"textbox shaded\">\r\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\r\n<p><strong>Mutual funds<\/strong> pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They are managed by professional fund managers who make investment decisions on behalf of the investors.<\/p>\r\n<p>Investors in mutual funds purchase shares, which represent their proportional ownership in the fund. Mutual funds offer diversification, liquidity, and convenience, allowing individuals to invest in a wide range of securities with relatively small amounts of money. Returns in mutual funds are based on the performance of the underlying investments and are typically distributed to investors in the form of capital gains or dividends.<\/p>\r\n<\/div>\r\n<p>Watch the following video for more information on the basics of investing, looking at stocks, bonds, mutual funds, and different types of interest.<\/p>\r\n<section class=\"textbox watchIt\"><iframe title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/qIw-yFC-HNU?si=Ihdmrc55Bh97yo7Z\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe>\r\n<p>You can view the <a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/The+Basics+of+Investing+(Stocks%2C+Bonds%2C+Mutual+Funds%2C+and+Types+of+Interest).txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cThe Basics of Investing (Stocks, Bonds, Mutual Funds, and Types of Interest)\u201d here (opens in new window).<\/a><\/p>\r\n<\/section>","rendered":"<section class=\"textbox learningGoals\">\n<ul>\n<li>Understand the fundamentals of Social Security benefits, including the eligibility criteria, benefit amounts, and strategies for claiming<\/li>\n<li>Assess the retirement benefits provided by their employer, such as 401(k) plans, pension plans, and other retirement savings options<\/li>\n<li>Differentiate between basic forms of investments, such as stocks, bonds, mutual funds, and real estate<\/li>\n<\/ul>\n<\/section>\n<h2>Social Security Benefits: Understanding the Fundamentals<\/h2>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p><strong>Eligibility requirements of social security:<\/strong> The criteria stipulates that typically [latex]40[\/latex] credits are needed, which is equivalent to approximately [latex]10[\/latex] years of work. These credits are based on your earnings, and the amount of earnings required for a credit changes from year to year. In 2023, for example, you earn one credit for each [latex]$1,410[\/latex] of wages or self-employment income, and you can earn up to four credits per year.<\/p>\n<p>The age at which one chooses to retire and start claiming benefits can significantly influence the amount received. You are entitled to your full retirement benefits at your full retirement age. Your <strong>full retirement age <\/strong>is dependent on the year of your birth.<\/p>\n<table>\n<tbody>\n<tr>\n<th style=\"text-align: center;\">Year of Birth<\/th>\n<th style=\"text-align: center;\">Full Retirement Age<\/th>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1942[\/latex] or earlier<\/td>\n<td style=\"text-align: center;\">[latex]65[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1943-1954[\/latex]<\/td>\n<td style=\"text-align: center;\">[latex]66[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1955[\/latex]<\/td>\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]2[\/latex] months<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1956[\/latex]<\/td>\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]4[\/latex] months<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1957[\/latex]<\/td>\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]6[\/latex] months<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1958[\/latex]<\/td>\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]8[\/latex] months<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1959[\/latex]<\/td>\n<td style=\"text-align: center;\">[latex]66[\/latex] and [latex]10[\/latex] months<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">[latex]1960[\/latex] and later<\/td>\n<td style=\"text-align: center;\">[latex]67[\/latex]<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p>You can begin claiming benefits as early as age [latex]62[\/latex], doing so will permanently reduce your monthly benefit. For each year you delay claiming past your full retirement age (which ranges from [latex]66[\/latex] to [latex]67[\/latex], depending on when you were born), you earn delayed retirement credits, which increase your monthly benefit up to age [latex]70[\/latex].<\/p>\n<p>The amount of an individuals Social Security benefits are calculated based on an individual&#8217;s <strong>average indexed monthly earnings<\/strong> (AIME). A person&#8217;s <strong>average indexed monthly earnings (AIME)<\/strong> is a calculated average that summarizes up to [latex]35[\/latex] years of a worker&#8217;s earnings, adjusted or &#8220;indexed&#8221; to reflect changes in general wage levels over the individual&#8217;s working years.<\/p>\n<p>One calculated, a person&#8217;s AIME is then put through a formula to compute the <strong>primary insurance amount<\/strong> (PIA). The <strong>primary insurance amount (PIA)<\/strong> is the benefit a person would receive if he\/she elects to begin receiving retirement benefits at his\/her FRA.<\/p>\n<\/div>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=10356036&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=O3tMi0egVZE&amp;video_target=tpm-plugin-fh9q0yja-O3tMi0egVZE\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><br \/>\n<em>Note: The bend points in the video are for 2020 and are different from the bend points for 2023.<\/em><\/p>\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/Heres+How+Much+Money+You%E2%80%99ll+Get+From+Social+Security.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cHere\u2019s How Much Money You\u2019ll Get From Social Security\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n<h2>Assessing Employer-Sponsored Retirement Benefits<\/h2>\n<h3>401(k)<\/h3>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong>A <strong>401(k)<\/strong> is a retirement savings plan offered by employers to their employees. It allows employees to contribute a portion of their pre-tax income to the plan, which grows tax-deferred until withdrawal during retirement. Contributions are often matched by employers up to a certain percentage. The funds in a 401(k) can be invested in a variety of options, providing the opportunity for growth over time.<\/p>\n<p>The two main types of 401(k) plans are <strong>traditional 401(k)<\/strong> and <strong>Roth 401(k)<\/strong>. In a traditional 401(k), contributions are made with pre-tax income, and withdrawals during retirement are subject to income tax. With a Roth 401(k), contributions are made with after-tax income, and qualified withdrawals in retirement are tax-free.<\/p>\n<\/div>\n<section class=\"textbox example\">Jameis signs up for his employer-based 401(k). The employer matches any 401(k) contribution up to [latex]7.5\\%[\/latex] of the employee salary. Jameis\u2019 annual salary is [latex]$72,800[\/latex].<\/p>\n<ol style=\"list-style-type: decimal;\">\n<li>What is the most money that Jamie can deposit that will be fully matched by the company?<\/li>\n<li>How much total will be deposited into Jameis\u2019 account if he deposits the full [latex]7.5\\%[\/latex]?<\/li>\n<\/ol>\n<p><div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q160916\">Show Solution<\/button><\/p>\n<div id=\"q160916\" class=\"hidden-answer\" style=\"display: none\">\n<ol style=\"list-style-type: decimal;\">\n<li>The employer will match up to [latex]7.5\\%[\/latex] of any employee\u2019s salary. [latex]7.5\\%[\/latex] of Jameis&#8217; salary is [latex]0.075\\times$72,800=$5,460[\/latex]. So Jameis can deposit up to [latex]$5,460[\/latex] and receive that amount in matching funds in his account.<\/li>\n<li>Jameis&#8217; contribution plus the company\u2019s contribution is [latex]$5,460+$5,460=$10,920[\/latex], which is the total that is deposited into Jameis&#8217; account.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=10356037&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=KrmZDqorxB4&amp;video_target=tpm-plugin-q00q8t71-KrmZDqorxB4\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/Everything+you+need+to+know+about+401(k)s.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cEverything you need to know about 401(k)s\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/Ovua8cC4LqY\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/Roth+401k+Or+Traditional+401k+-+Which+Is+The+Better+Investment_.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cRoth 401k Or Traditional 401k &#8211; Which Is The Better Investment?\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n<h3>Pension Plans<\/h3>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p>A <strong>pension plan<\/strong> is a retirement benefit provided by employers that guarantees a specific income to employees upon retirement. It is typically based on a formula that considers factors like years of service and average salary. Pension plans are funded by contributions from employers and sometimes employees. The employer is responsible for managing the investments and assumes the risk. Pension payments are usually provided as a monthly income for the retiree&#8217;s lifetime.<\/p>\n<\/div>\n<h2>IRA<\/h2>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p><strong>Individual Retirement Accounts (IRAs)<\/strong> are personal retirement savings accounts that offer tax advantages. They are typically opened by individuals to supplement their employer-sponsored retirement plans or for those who don&#8217;t have access to such plans.<\/p>\n<p>IRAs allow individuals to contribute a certain amount of money each year, and the contributions may be tax-deductible depending on eligibility and type of IRA. The funds within an IRA can be invested in a variety of options, and earnings grow tax-deferred or tax-free, depending on the type of IRA. Withdrawals from IRAs are generally taxed and may be subject to penalties if taken before retirement age.<\/p>\n<p>The two main types of IRAs are <strong>traditional IRA<\/strong> and <strong>Roth IRA<\/strong>. In a traditional IRA, contributions may be tax-deductible, and earnings grow tax-deferred until withdrawals, which are then taxed as ordinary income. With a Roth IRA, contributions are made with after-tax income, but qualified withdrawals in retirement are tax-free.<\/p>\n<\/div>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=10356035&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=l9TMesiI7SE&amp;video_target=tpm-plugin-lmn0nkqo-l9TMesiI7SE\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/IRA+Explained+In+Less+Than+5+Minutes+%7C+Simply+Explained.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cIRA Explained In Less Than 5 Minutes | Simply Explained\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n<h2>Investing<\/h2>\n<h3>Distinguish Between Basic Forms of Investments<\/h3>\n<h4>Bonds<\/h4>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p><strong>Bonds<\/strong> are debt instruments issued by governments, municipalities, and corporations to raise capital. When an investor purchases a bond, they are essentially lending money to the issuer in exchange for regular interest payments and the return of the principal amount at maturity.<\/p>\n<p>Bonds are considered relatively safer investments compared to stocks as they offer a fixed income stream and are generally less volatile. The risk and return associated with bonds vary depending on factors such as the creditworthiness of the issuer, term length, and prevailing interest rates.<\/p>\n<\/div>\n<section class=\"textbox example\">Maureen invests [latex]$5,000[\/latex] in a bond with a maturity date in [latex]5[\/latex] years at a fixed coupon rate of [latex]4.75\\%[\/latex]. How much is Maureen paid each year and how much does she receive on the maturity date?<\/p>\n<div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q160936\">Show Solution<\/button><\/p>\n<div id=\"q160936\" class=\"hidden-answer\" style=\"display: none\">The coupon rate is [latex]4.75\\%[\/latex]. [latex]4.75\\%[\/latex] of their bond value is [latex]0.0475\\times$5,000=$237.50[\/latex]. After year [latex]1[\/latex], Maureen receives [latex]$237.50[\/latex]. They receive [latex]$237.50[\/latex] after years [latex]2[\/latex], [latex]3[\/latex], and [latex]4[\/latex]. In year [latex]5[\/latex], when the bond matures, Maureen receives [latex]$5,237.50[\/latex], (the interest for the year and the initial principal).\n<\/div>\n<\/div>\n<\/section>\n<h3>Certificates of Deposit (CDs)<\/h3>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p>Certificates of Deposit (CDs) are financial products offered by banks and credit unions that provide a fixed interest rate for a specified period of time. When an individual purchases a CD, they deposit a specific amount of money for a predetermined term, ranging from a few months to several years.<\/p>\n<p>CDs are considered low-risk investments as they are insured by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. The interest earned on CDs is typically higher than traditional savings accounts, and the principal is returned at the end of the term. Early withdrawals from CDs may result in penalties.<\/p>\n<\/div>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=11243201&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=LmWekTyGAHA&amp;video_target=tpm-plugin-vpcsl8ha-LmWekTyGAHA\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/What+You+Need+To+Know+About+CDs+Certificates+of+Deposit.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cWhat You Need To Know About CDs (Certificates of Deposit)\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n<h3>Stocks<\/h3>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p><strong>Stocks<\/strong> represent ownership shares in a publicly traded company, offering individuals the opportunity to become partial owners. Investors who purchase stocks, known as shareholders, have the potential to benefit from the company&#8217;s growth and profitability.<\/p>\n<p>Stock prices can fluctuate based on market conditions, company performance, and investor sentiment. Shareholders may receive dividends as a portion of the company&#8217;s profits, and they have the ability to sell their shares in the stock market. Investing in stocks carries risks, including the potential loss of principal, but also offers the potential for capital appreciation.<\/p>\n<\/div>\n<section class=\"textbox example\">\n<ol style=\"list-style-type: decimal;\">\n<li>Find the percent yield for a stock with a price of [latex]$37.40[\/latex] and an annual dividend of [latex]$1.60[\/latex].<\/li>\n<li>Find the percent yield for a stock with a price of [latex]$73.22[\/latex] and an annual dividend of [latex]$2.41[\/latex].<\/li>\n<\/ol>\n<p><div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q160931\">Show Solution<\/button><\/p>\n<div id=\"q160931\" class=\"hidden-answer\" style=\"display: none\">\n<ol style=\"list-style-type: decimal;\">\n<li>Substituting the values for price, [latex]$37.40[\/latex], and annual dividend, [latex]$1.60[\/latex], we find the percent yield for the stock to be [latex]\\text{Yld}\\%=\\frac{\\text{annual dividend}}{\\text{share price}}\\times100\\%=\\frac{$1.60}{$37.40}\\times100\\%=4.28\\%[\/latex]\n<\/p>\n<\/li>\n<li>Substituting the values for price, [latex]$73.22[\/latex], and annual dividend, [latex]$2.41[\/latex], we find the percent yield for the stock to be [latex]\\text{Yld}\\%=\\frac{\\text{annual dividend}}{\\text{share price}}\\times100\\%=\\frac{$2.41}{$73.22}\\times100\\%=3.29\\%[\/latex]<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=10356034&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=r6EuvZCJl7g&amp;video_target=tpm-plugin-07tgq67q-r6EuvZCJl7g\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the\u00a0<a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/How+to+Read+a+Stock+Summary+-+Learn+to+Trade+Stocks.txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cHow to Read a Stock Summary &#8211; Learn to Trade Stocks\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n<section class=\"textbox example\">Consider the stock table shown below, and answer the questions based on the table.\u00a0<br \/>\n\u00a0 <img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-4972\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207.png\" alt=\"A census graph. The key data factors. The x-axis ranges from 10 am to 3 pm in increments of 1 and the y-axis ranges from $30 to $30.75 in increments of 0.25. An increasing and decreasing curve is graphed. The factors are: Open: $30.42, 52 week range: 30.05 - 56.28, Shares outstanding:4.11 B, beta:1.21, P\/E ratio: 6.57, yield: 4.77 percent, Ex-dividend date: August 4, 2022, percentage of float shorted: 1.54 percent, Day range:30.05 \u2013 30.68, Market cap: $124.66 B, Rev. per employee: $606.06 K, E P S: $4.66, Short interest: 63.38 M, Average volume: 39.01 M. The performance for 5 days, 1 month, 3 months, Y T D, and 1 year are minus 3.92, minus 13.29, minus 25.61, minus 40.45, and minus 42.75 percent.\" width=\"998\" height=\"932\" srcset=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207.png 998w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207-300x280.png 300w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207-768x717.png 768w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207-65x61.png 65w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207-225x210.png 225w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/23144222\/Screenshot-2023-06-23-104207-350x327.png 350w\" sizes=\"(max-width: 998px) 100vw, 998px\" \/><\/p>\n<p>&nbsp;<\/p>\n<ol style=\"list-style-type: decimal;\">\n<li>What is the current price for Intel Corp on this date?<\/li>\n<li>What is the [latex]52[\/latex]-wk high? [latex]52[\/latex]-wk low?<\/li>\n<li>When is the dividend expected?<\/li>\n<li>What is its yield?<\/li>\n<li>What is the earnings per share?<\/li>\n<\/ol>\n<p><div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q160932\">Show Solution<\/button><\/p>\n<div id=\"q160932\" class=\"hidden-answer\" style=\"display: none\">\n<ol style=\"list-style-type: decimal;\">\n<li>Looking at the table, the current price of a share is [latex]$30.68[\/latex].<\/li>\n<li>The high was [latex]$56.28[\/latex], and the low was [latex]$30.05[\/latex].<\/li>\n<li>August 4, 2022<\/li>\n<li>[latex]4.77\\%[\/latex]<\/li>\n<li>The EPS value is [latex]$4.66[\/latex].<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"textbox example\">Yulia owns [latex]300[\/latex] shares of stock in YYZ company. It pays [latex]$1.12[\/latex] per share this quarter. How much did Yulia earn this quarter on stock in YYZ?<\/p>\n<div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q160933\">Show Solution<\/button><\/p>\n<div id=\"q160933\" class=\"hidden-answer\" style=\"display: none\">\nEach share pays [latex]$1.12[\/latex], so Yulia earns [latex]300\\times$1.12=$336.00[\/latex].<\/div>\n<\/div>\n<\/section>\n<section class=\"textbox example\">Serenity buys [latex]200[\/latex] shares of stock in UUK company for [latex]$9.76[\/latex] per share. At the end of the year, she sells those stocks for [latex]$10.02[\/latex] per share.<\/p>\n<ol style=\"list-style-type: decimal;\">\n<li>How much money did Serenity make?<\/li>\n<li>What was her return on investment for that one year?<\/li>\n<\/ol>\n<p><div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q160934\">Show Solution<\/button><\/p>\n<div id=\"q160934\" class=\"hidden-answer\" style=\"display: none\">\n<ol style=\"list-style-type: decimal;\">\n<li>Serenity spent [latex]$9.76[\/latex] per share to buy the stock. The total she spent on the stock was [latex]$9.76\\times200=$1952.00[\/latex]. When she sold the stock, the price was [latex]$10.02[\/latex], so she received [latex]$10.02\\times200=$2,004.00[\/latex]. She made [latex]$2,004.00\u2212$1952.00=$52.00[\/latex].<\/li>\n<li>Her return on investment was [latex]\\frac{\\text{Earnings}}{\\text{Original Price}}=\\frac{$52}{$1952.00}=2.66\\%[\/latex].<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/section>\n<h3>Mutual Funds<\/h3>\n<div class=\"textbox shaded\">\n<p><strong>The Main Idea\u00a0<\/strong><\/p>\n<p><strong>Mutual funds<\/strong> pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They are managed by professional fund managers who make investment decisions on behalf of the investors.<\/p>\n<p>Investors in mutual funds purchase shares, which represent their proportional ownership in the fund. Mutual funds offer diversification, liquidity, and convenience, allowing individuals to invest in a wide range of securities with relatively small amounts of money. Returns in mutual funds are based on the performance of the underlying investments and are typically distributed to investors in the form of capital gains or dividends.<\/p>\n<\/div>\n<p>Watch the following video for more information on the basics of investing, looking at stocks, bonds, mutual funds, and different types of interest.<\/p>\n<section class=\"textbox watchIt\"><iframe loading=\"lazy\" title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/qIw-yFC-HNU?si=Ihdmrc55Bh97yo7Z\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/course-building.s3.us-west-2.amazonaws.com\/Quantitative+Reasoning+-+2023+Build\/Transcriptions\/The+Basics+of+Investing+(Stocks%2C+Bonds%2C+Mutual+Funds%2C+and+Types+of+Interest).txt\" target=\"_blank\" rel=\"noopener\">transcript for \u201cThe Basics of Investing (Stocks, Bonds, Mutual Funds, and Types of Interest)\u201d here (opens in new window).<\/a><\/p>\n<\/section>\n","protected":false},"author":15,"menu_order":33,"template":"","meta":{"_candela_citation":"[]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":4885,"module-header":"fresh_take","content_attributions":[],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4865"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/users\/15"}],"version-history":[{"count":47,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4865\/revisions"}],"predecessor-version":[{"id":14706,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4865\/revisions\/14706"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/parts\/4885"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4865\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/media?parent=4865"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapter-type?post=4865"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/contributor?post=4865"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/license?post=4865"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}