2. To be able to analyze the risk of an
investment.

3. 1. Inflation
 The consistent rise in prices of
goods and services over time
 Example – McDonald’s
hamburger in 1967 costs 10
cents, now it costs about a
dollar
 Why?

4. 1. Inflation
 If your rate of return is less than
the inflation rate, you are actually
losing the value of your
investment – EVEN IF YOU HAVE
MORE MONEY!
Item 1999 2011 Rate of
Inflation
Dozen Eggs $1.15 $1.35 17%
Gallon of Milk $1.46 $3.99 173%
Gallon of Gas $1.12 $3.87 246%

5. 2. Interest Rate
 If the Federal Reserve
adjusts interest rates, you
might be locked into a higher
or lower interest rate than
what is currently available

6. 2. Interest Rate
 Adjustable – Rate for your
investment changes with the
Federal rates
 Fixed – Rate stays the same
throughout the loan or
investment

7. 3. Business Failure
 Investments in companies
that go bankrupt are lost!
 This can be minimized
depending on the company

8. 4. Financial Market
 The public’s perception of the
economy and various
financial markets

9. 5. Global Events
 When events around the
world effect the value of
certain investments
 Example: After 9/11, which
investments lost value?
Which gained value?

10. How would you change the risk
continuum after knowing the
types of risk?