Cogito
Consumer Math · Chapter 8 · Lesson 1
Stocks, Bonds, and Funds
What you actually own.
12 problems · about 21 minutes · TEKS M.M.8.A
What this lesson teaches
The student distinguishes stocks, bonds and funds, and relates risk to expected return.
- A stock is ownership; a bond is a loan; a fund holds many of both.
- Higher expected return comes only with larger swings.
- Fees compound against you exactly as returns compound for you.
Warm Up
Straightforward practice. Get the method working first.
5 problemsA 1% annual fee on $100000. Fee in dollars?
Answer 1000
Why $1000.
What does diversification do?
Answer Spreads money across holdings so no single failure is fatal.
Why It removes the risk of a single holding sinking everything.
Which represents ownership? 1 stock, 2 bond.
Answer 1
Why A share of the company.
A 0.05% fee on $200000. Fee in dollars?
Answer 100
Why 0.0005 × 200000.
A 1% fee on $50000. Fee in dollars?
Answer 500
Why 0.01 × 50000.
Build It Up
The same ideas with more to keep track of.
3 problemsWhich usually returns more over decades? 1 bonds, 2 stocks.
Answer 2
Why With larger swings.
Which usually swings less year to year? 1 bonds, 2 stocks.
Answer 1
Why Steadier and lower returning.
Can a legitimate investment offer high return with no risk? 1 yes, 0 no.
Answer 0
Why They move together.
Stretch Yourself
Mixed problems. Work out what kind of question it is before you start.
4 problemsMatch each investment with what it is.
Answer Stock → A share of ownership in a company; Bond → A loan repaid with interest; Fund → A basket of many holdings at once
Why Only one of them makes you a part owner.
A 0.5% fee on $80000. Fee in dollars?
Answer 400
Why 0.005 × 80000.
The Fee: A 1% annual fee on a $200000 balance. Fee for the year, in dollars?
Answer 2000 dollars
Why $2000.
The Loan: Which is a loan to a company rather than ownership of it? 1 stock, 2 bond.
Answer 2
Why A bond.