Running head: WHY TO INVEST! 1
Why to Invest
Sydney J. Dyer
Post University
Author Note
Why you should invest your money!
WHY TO INVEST! 2
Abstract
In this document I will explain the benefits of investing your money. I will also show you
how it changes and the effects of investing your money. This is going to go into depth about the
highlights of interest and bonds.
WHY TO INVEST! 3
Why to Invest
Good Morning and thank you for joining me. Today I am going to talk to you about why
investing your money is the best option for you and your business. I will discuss how it benefits
you as well as show you some examples of how it works. I look forward to speaking with you
and letting you get to know me and how investing works.
I can not show you how this works without first explaining what real interest is and what
is needed to compensate for risk. This is the core to any great investment and the benefits that
come with it. Real interest rate, which is the compensation over and above inflation, that a lender
demands to lend his money. There are five risks that come with interest. Which include, business
risk, financial risk, liquidity risk, exchange-rate risk, and country-specific risk. What is a risk?
Webster’s dictionary defines risk as the excess return above the risk-free rate that investors
require as compensation for the higher uncertainty associated with risky assets.
Interest rate risk is the risk that an investment’s value will change due to a change in the
absolute level of interest rates, the spread between two rates, in the shape of the yield curve, or in
any other interest rate relationship. This type of risk affects the value of bonds more directly than
stocks and is a significant risk to all bondholders.
Investor and public expectations of current or future inflation. These expectations may or
may not be rational, but they may affect how the market reacts to changes in target interest rates.
This is what we call expected rate of inflation. This is what you as an investor will expect from
me when you hand me your money.
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Default risk is the risk that a lender takes on in the chance that a borrower will be unable
to make the required payments on their debt obligation. Lenders and investors are exposed to
default risk in virtually all forms of credit extensions. This risk is for the lender, so this is a risk I
would be taking by loaning out money.
Then you have the risk of Taxability which is the right to tax anything you may obtain.
This states that you must report and pay taxes on the earnings that you have made from an
investment.
A liquidity crisis is a financial situation characterized by a lack of cash or easily-
convertible to cash assets on hand across many businesses or financial institutions
simultaneously. In a liquidity crisis, liquidity problems at individual institutions lead to an acute
