PFL 5.1 Worksheet
PFL 5.1
Risk & Return
Name:
Period:
TEKS PFL C6(D): Compare the risks and potential returns of investments and explain which option fits a person's financial situation.
Bell Ringer: The Coin Flip Dilemma
Warm-Up (5 min)
Imagine you saved $200 to buy something you really want. A friend offers you a coin flip:
HEADS: Win extra +$100 ($300 total)
TAILS: Lose -$100 of savings ($100 left)
Would you take the chance or keep your $200? Check one and explain:
Take the chance (Flip the coin) Keep my $200 safe (Do not flip)
I would choose to _______________________________________ because _______________________________________
Stop & Jot: Jordan's Investment Decision
Case Study
Jordan is 18 years old and has $1,000 to invest. Jordan will NOT need the money for at least 15 years and wants it to grow. Jordan is considering two choices:
Option A: Government Bond
Lower risk, predictable return. Slower growth.
Option B: Diversified Stock Mutual Fund
More potential for growth, but value can rise or fall.
Which investment would you recommend for Jordan? Complete the sentence frame:
I recommend Option ( A / B ) because Jordan has 15 years before needing the money.
This choice makes sense because
Concept Check: Saving vs. Investing
Comparison
Imagine you have $500. Complete the comparison using the word bank:
Word Bank: Safe | Growth | Risk | Short-Term | Long-Term | Emergencies
SAVING (Bank Savings Account)
- • Money is very and easy to access.
- • Best for goals or .
- • Low risk, but very little growth.
INVESTING (Stocks & Funds)
- • Potential for high over many years.
- • Involves more ; value can rise or fall.
- • Best for goals like retirement.
How Investments Make or Lose Money
Calculations
Scenario A: Stock Goes UP
You buy stock for $200. Later, its value rises to $260.
Your investment GAINED: $ (This is your RETURN).
Scenario B: Stock Goes DOWN
You buy stock for $200. Later, its value falls to $150.
Your investment LOST: $ (This shows investment RISK).
PFL 5.1
Risk & Return (Part 2)
Application & Assessment
Identifying Investment Types
Practice
Options: STOCK (Ownership) | BOND (Lending) | MUTUAL FUND (A Mix)
For each real-life scenario, write which investment type is described:
1. You loan money to the U.S. Treasury, and they promise to repay you with interest:
2. You buy 1 share of Apple, giving you partial ownership in the company:
3. You buy a single "basket" that holds a mix of Nike, Disney, and Amazon shares:
4. Complete: Spreading money across many investments to lower risk is called ("Don't put all eggs in one basket").
Vocabulary Matching
Key Terms
1. Risk [ ]
2. Return [ ]
3. Stock [ ]
4. Bond [ ]
5. Mutual Fund [ ]
6. Diversification [ ]
A. Money loaned to a government or company that is repaid with interest.
B. Spreading money across different investments to reduce risk.
C. The possibility of losing money or investment value.
D. A collection of investments purchased with pooled money.
E. A small ownership share in a single company.
F. The amount of money an investment gains or loses.
Time Horizon Case Studies
Scenarios
Case 1: Jayden vs. Maria ($500 saved)
Jayden needs his $500 for car repair next month. Maria will not need her $500 for 10 years.
Who can afford more investment risk?
[ ] Jayden [ ] Maria
Because Maria has a (circle): longer / shorter time horizon to recover from losses.
Case 2: Alex vs. Taylor ($2,000 saved)
Alex buys a car in 6 months. Taylor starts saving for retirement in 40 years.
Alex's best choice:
[ ] Safe savings account [ ] Stocks
Taylor's best choice:
[ ] Safe savings account [ ] Stock mutual fund
Multiple Choice Check
Exit Assessment
1. What is the basic rule of risk and return in investing?
A. Higher risk investments offer the potential for higher returns.
B. Lower risk investments always earn the most total money.
C. All investments have the exact same level of risk and return.
D. Higher risk guarantees that you will never lose any savings.
2. Why is an 18-year-old usually able to handle more investment risk than a 65-year-old?
A. The 18-year-old has a longer time horizon to recover from market drops.
B. The 18-year-old will need all their money next month for retirement.
C. The 65-year-old wants to take high risks right before retiring.
D. Younger people are legally not allowed to put money in savings accounts.
3. Which investment provides instant diversification by combining many different stocks?
A. A single stock
B. A mutual fund
C. A savings bond
D. Cash under a bed
