1. I want you to select two different stocks to invest a virtual $5000. Pick any two stocks from the entire market, any two. (Apple, GM, Target, Lulu Lemon}
a.Tell me how many shares of each stock you have decided to purchase. (You do not have to buy equal dollar amounts or shares of each stock.. Don't consider transaction costs). Your stocks need to equal $5000.
b. Does you stock selection match your risk level, explain?
c. How does the Price/Earning Ratio ( P/E Ratio) help you make your selection? It should help you somewhat.
d. What is the PE of your stocks. Does this match your risk level? This question should be enjoyable. It is easily doable but requires a little work. If you are working in teams don't select the same stock.
2. What is the relationship of Bond Prices to Market Rates. See Exhibit 12.7 3 The three "Pitfalls" of young investors is they invest too little, too late and too conservatively. This statement not only applies to retirement planning but also to general savings and investing.
a. Explain how this statement may or may not be relative to you or some of your friends investing practices or philosophy.
b. Explain which of the three pitfalls may apply to you and why.
c. Which of these can you take most advantage of now that you are aware of them.