Page 474 - Business Principles and Management

Chapter 17 • Financial Services

17.3 Investing and Investments

Goals Terms
• Identify the characteristics of • investment • money market
various investment instruments. • savings account account
• Describe how investment decisions • savings bond • mutual fund
can be made to meet financial • certificate of • Treasury instruments
goals. deposit (CD) • stock index

Investment Instruments

Individuals, families, businesses, and other organizations need adequate financial
resources to meet their needs. Money can be obtained in two ways—earnings result-
ing from the work of individuals or the operation of businesses, and earnings from
investments. An investment is the use of money to make more money. When indi-
viduals or businesses have cash that is not immediately needed, it can be invested.
There are many investment options available, whether the money to be invested
is a small or large amount and whether it is available for a short or long time
period. Some types of investments carry greater risks than others. Some provide
greater returns or earnings than others. To make wise investment decisions,
business managers and individual investors need to know about the types of invest-
ment instruments and how to choose among them to meet their investment goals.
Most investments are made using the services of financial institutions. Those
institutions are constantly seeking new and better ways to serve customers. They
offer a wide variety of financial instruments from which customers can select
those that best fit their investment needs. Figure 17-5 identifies several of the
most common financial instruments.

INTEREST-BEARING CHECKING ACCOUNTS A checking account is a demand deposit
through which investors can safely maintain money in a financial institution yet
access it at any time through writing a check or making an electronic withdrawal.
Many checking accounts pay a very low interest rate if the account balance is kept

FIGURE 17-5 Investors can choose from a variety of financial
instruments to meet their investment goals.

Interest-Bearing Checking Accounts Treasury Bills
Regular Savings Accounts Treasury Notes
Savings Bonds Treasury Bonds
Certificates of Deposit (CDs) Corporate Stocks
Money Market Funds Corporate Bonds
Mutual Funds

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