Chapter 27

Chapter 27 gets into a new topic of finance. It deals with the general idea of finance and how values of money change over time. A present value of money could be worth more in the future, depending on interest rates and the timetable for the money. Chapter 27 also deals with financial risk. We talked a little bit about risk last Chapter, but this goes into more depth. There is more risks in certain financial endeavors than others, and some individuals tend to take more risk than others.

There are ways to avoid risk, but primarily through insurance, accepting lower returns, and diversification. In class, we talked about how insurance is a good way to be prepared if something unexpected happens to you, your home, or your car. Also last chapter, we discussed how diversification through stocks and bonds is a good way to reduce risk, such as when someone has a mutual fund. Also, accepting lower returns shows a longer time investment, thus less risk.