Economics Year 9

Economics Year 9

​Investment an asset or item acquired with the goal of generating income or appreciation.

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People can invest their money in a variety of

investments.

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Each with their own set of risks and rewards

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Poll

Buying a house, apartment or land to make money from capital growth and/or rental income

• Shares

• Term deposit

• Property

• Managed Fund

Poll

Units of ownership in a company that entitle the possessor of the shares (the shareholder) to a proportion of any profits that the company makes

• Shares

• Term deposit

• Property

• Managed Fund

Poll

A deposit that is locked in for a fixed period of time for a higher rate of interest

• Shares

• Term deposit

• Property

• Managed Fund

Poll

Portfolios of shares, property, public infrastructure, private equity and other investments that are chosen by a professional fund manager

• Shares

• Term deposit

• Property

• Managed Fund

​All businesses need to interact with a financial institution, be it for borrowing or depositing money.

In Australia businesses have three main options in terms of financial institutions that are authorised to accept deposits.

Poll

Which of the following are not one of the three main institutions authorised to accept deposits?

• Banks

• Insurance Companies

• Credit Unions

• Building Society

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Insurance companies are not one of the three main institutions authorised to accept deposits.

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While it is possible to borrow from an insurance company, the money they collect is through premiums on insurance policies, not deposits that can be drawn upon

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All investments involve some type of risk. The main type of risk is referred to as a financial risk.

However, this is not the only type of risk a person or business may be exposed to. There are four financial risks.

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Poll

Which two of the following are considered financial risks?

• Liquidity risk

• Equity Risk

• Debit Risk

• Cash Risk

• Market Risk

Financial risks include:

• liquidity risk

• market risk.

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Liquidity risk refers to the inability to withdraw from an investment quickly to avoid a loss.

Market risk refers to the risk that interest rates or share prices will fall and a loss will be made on the investment.

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All investments carry some risk.

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Investors need to take action or steps to minimise that risk.

Poll

One means of minimising risk is through

• Bonds

• Insurance

• Investment

• Hiring more staff

Insurance provides a safety net for investors — if a loss is experienced unexpectedly, then the insurance policy may cover some or all of the loss.

Poll

Which one of the following is the appropriate set of steps in establishing a savings plan?

• Calculate how much you can save, calculate expenses, start saving, spend savings

• Calculate expenses, calculate how much you can save, start saving, periodically re-evaluate your goals

• Calculate income, calculate expenses, calculate how much you can save, start saving

Managing money is an important skill and it is one that should start early in life.

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The best way to develop this skill is to learn how to prepare a savings plan.

It is important to determine how much can be saved regularly and then save that amount.

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It is also important to re-evaluate periodically as circumstances can change.

​Liquidity, operational, market and credit are the key financial risks faced by investors.

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There are, however, two other types of financial risks.

Poll

The first is a dishonest scheme known as a

• scam

• trap

Poll

The second is where personal details are illegally obtained by another person and these details are used for personal gain.

This is known as

• Personality Theft

• Identity Theft

The first is a dishonest scheme known as a scam.

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The second is where personal details are illegally obtained by another person and these details are used for personal gain. This is known as identity theft.

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All investments involve risk — it is why the rewards are often so high.

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Investors must assess the risk and the reward, and do research so as to avoid these risks or at least minimise them

Poll

Investments are often strategies people adopt to prepare themselves for a financial future after they _____. A good strategy is to put additional money into personal ______ and/or _______

Choose the right combination of words

• retire, business, pension

• expire, saving, superannuation

• retire, business, pension

• retire, savings, superannu

​Investments are often strategies people adopt to prepare themselves for a financial future after they retire. A good strategy is to put additional money into personal savings and/or superannuation.

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Savings and superannuation is money that is put away for ‘a rainy day’. If managed correctly they can provide a regular income for people once they have retired.

Poll

Which body oversees banks, credit unions and building societies’ operations to ensure they are acting legally and ethically?

• ADI

• APRA

• ATM

• ASA

​The Australian Prudential Regulation Authority (APRA) oversees authorised deposit-taking institutions (ADIs).

Financial risk can be minimised by individuals or businesses through the use of insurance.

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In modern Australian society there are a range of insurance options for people and businesses to use so as to reduce their risk.

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Poll

Identify four different types of insurance a business may invest in.

• Vehicle

• Pet

• Income Protection

• Building

There are a number of different types of specific insurance policies a business could invest in. Some of these are:

• Vehicle insurance — if a business has vehicles, then insuring them against theft, damage or accident is a means of reducing the risk of being left without a vehicle while trying to conduct business.

• Business insurance — this insurance can protect the assets of the business from theft, damage or loss through public liability claims.

• Income protection insurance — people who operate their own business can’t afford to be off work and so they can take out insurance to protect themselves if their capacity to earn an income is affected.

• Home/building insurance — protects the premises from which the business operates, plus all the equipment, stock, tools and machinery of the business.

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All investments involve some risk.

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There are four categories of risk

Poll

losses may occur due to external events that the business has no control over.

• Credit risk

• Market risk

• Liquidity risk

• Operational risk

Operational risk — losses may occur due to external events that the business has no control over.

Poll

chance that a loss can occur because a borrower or lender is financially unable to make a repayment.

• Credit risk

• Market risk

• Liquidity risk

• Operational risk

Credit risk — chance that a loss can occur because a borrower or lender is financially unable to make a repayment.

Poll

chance that a loss may occur because the holder of the investment can’t trade the investment quickly enough to make the desired profit.

• Credit risk

• Market risk

• Liquidity risk

• Operational risk

Liquidity risk — chance that a loss may occur because the holder of the investment can’t trade the investment quickly enough to make the desired profit.

Poll

loss brought on by a decrease in interest rates or share prices.

• Credit risk

• Market risk

• Liquidity risk

• Operational risk

Market risk — loss brought on by a decrease in interest rates or share prices.