Page 457 - Business Principles and Management

C HAPTER 16 A SSESSMENT

CASE 16-2: Taking Stock of Investments
Reika Mori is a member of a four-person carpool. Morning conversations
on the way to work often deal with what people did the night before. Reika
started the discussion today because she had attended an information ses-
sion the previous evening on investments. Here is the conversation that
occurred among the carpool members.
Lou: I’ve always thought about investing but really don’t want to
get in over my head. I have heard of people who made a for-
tune but also know that you can easily lose all your money as
well. Did you learn anything that can help me, Reika?
Reika: I learned that there are all kinds of stocks and bonds and even
other types of investments. There’s something to meet everyone’s
needs. But at this point it’s still quite confusing. I’m going to
have to learn a lot more before I would feel comfortable giving
you advice.
Pablo: My brother is an investment banker, and he told me that bonds
might be a good choice to consider when I’m first starting out.
He said choosing the right bonds really takes most of the risk out
of investments. Did you hear anything like that at the seminar?
Reika: Not really. The speaker spent nearly all the time talking about
stocks. Maybe next week’s lecture will cover bonds.
Brenda: My uncle gave Larry and me some stock for a wedding gift
five years ago. We have considered selling even though we get
a regular dividend check every three months. It’s not a lot of
income, but it gives us some spending money. We wonder if
we would make more if we sold the stock and put the money
in the bank to earn interest.
Reika: Brenda, I did learn how to read stock tables at the seminar.
Let’s have lunch today. I’ll get a copy of the newspaper and
we can determine how much you would make if you sold the
stock and how well the company’s stock is doing. You might
be better off keeping the stock because the market is doing
pretty well right now. The increase in the stock price could be
much more than you can make by putting the money in a sav-
ings account. Can you have lunch with me today? I did learn
something about mortgage bonds that might be helpful.

THINK CRITICALLY
1. Do you agree with Pablo’s brother that bonds are less risky than
other investments? Why or why not?
2. What information can Reika obtain from a stock table that will help
Brenda understand what to do with the stock she owns? What addi-
tional information would you recommend they review in order to
decide which investment choice is best for Brenda and her husband?
3. If you were in the carpool, what would you say to Lou to make him
less fearful of investing some of his money?

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