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Students learn finance basics.

 

 

INTRO TO RISK, RETURN, AND OPPORTUNITY COST OF CAPITAL

Concept:   Risk, Return, and Opportunity Cost of Capital

Objectives

  • Understand and define investment portfolio
  • Understand and determine how to measure portfolio risk
  • Understand the concept of variance and standard deviation
  • Understand how to measure variability
  • Understand how diversification reduces risk
  • Understand and determine how to calculate portfolio risk
  • Understand the concept of beta & market risk

Suggested Grades:

Ninth Grade - Tenth Grade - Eleventh Grade - Twelfth Grade - Adult Education - Business Education

 

 

RISK RETURN LESSON PLAN

 

Teaching Materials

  • Lesson - Intro to Risk, Return, and Opportunity Cost of Capital  (see below for printable lesson)

  • Overhead

  • Many pre-calculated examples


Lesson Activity

  • Define risk and return
  • Discuss the relationship between the two – high/high or low/low
  • Introduce concept of investment portfolio
  • Define portfolio risk
  • Introduce variance
    • measure of uncertainty
    • present formula
    • work through examples
  • Introduce Standard Deviation
    • present formula
    • talk about using a calculator to calculate SD and variance
  • Discuss the concept of diversification
    • Discuss real life examples – stocks, bonds, money market vehicles, large cap, small cap, foreign markets, etc…
  • Introduce covariance
    • present formula
    • work through examples
  • Work through SD of a portfolio
  • Discuss Beta
    • look at calculation of portfolio beta
    • work through examples
    • negative versus positive beta


Assessment/Evaluation

Have students complete worksheet. A passing grade is 70% or greater. 

 

 

 

Lesson Printable Materials - Worksheets

Print out the teaching lesson pages and exercise worksheets for use with this lesson:

 

RISK AND RETURN LESSON

Intro to Risk, Return, and Opportunity Cost of Capital Lesson and Worksheet

Lesson and worksheet.

 

 

 

 

 

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