LESSON 19 INVESTING INTERNATIONALLY LEARNING AND INVESTING FOR

LESSON 19 INVESTING INTERNATIONALLY LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 1 LESSON 19 –INVESTING INTERNATIONALLY The Benefits and Costs of Investing Internationally • Benefits ■ Diversification: Investors can spread risk by owning stocks or bonds of foreign businesses ■ Growth: Some foreign businesses may be growing faster than domestic businesses; this may be especially true for emerging markets • Costs ■ Currency risk: Exchange-rate changes may mean losses or gains ■ Instability: Businesses in emerging markets may experience unexpected economic or political changes ■ Accounting standards: Some markets in other countries require less disclosure of information ■ Taxes: International investments may be taxed differently than domestic investments. LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 2 LESSON 19 –INVESTING INTERNATIONALLY International Revenue for Selected U. S. Companies Company Name Description 2010 Revenues 2010 percentage of revenues from international markets Coca-Cola Soft Drinks $35 Billion 75% Mc. Donald’s Fast Food $24 Billion 60% Pfizer Pharmaceuticals $43 Billion 55% Procter & Gamble Consumer Products $79 Billion 32% LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 3 LESSON 19 –INVESTING INTERNATIONALLY Exchange Rate Examples • Converting dollars to yen ■ ■ ■ 1 U. S. dollar = 76. 8 Japanese yen A Japanese company’s stock sells for 3, 800 yen per share How many shares can be purchased with $10, 000? $10, 000 x (76. 8 yen / $1) = 768, 000 yen / 3, 800 yen per share = 202. 1 shares • Converting yen to dollars ■ ■ ■ 1 yen = 0. 01 U. S. dollar A U. S. company’s stock sells for $80 per share How many shares can be purchased with 1, 000 yen? 1, 000 yen x ($0. 01 / yen) = $13, 022 / $80 per share = 162. 8 shares LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 4 LESSON 19 –INVESTING INTERNATIONALLY Strong Dollar, Weak Dollar • What is a strong dollar? ■ The value of the dollar rises compared to another currency, or more than one other. ■ More foreign currency is necessary to purchase U. S. dollars. ■ The value of the dollar is appreciating • What is a weak dollar? ■ The value of the dollar falls compared to another currency, or more than one other. ■ More U. S. dollars are necessary to purchase foreign currency. ■ The value of the dollar is depreciating. LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 5 LESSON 19 –INVESTING INTERNATIONALLY Exchange Rate Changes • Dollar appreciates ■ ■ ■ Before appreciation: 1 U. S. dollar = 76. 8 Japanese yen After appreciation: 1 U. S. dollar = 80. 5 Japanese yen $1 buys more yen $10, 000 x (80. 5 yen / $1) = 805, 000 yen / 3, 800 yen per share = 211. 8 shares (202. 1 when dollar was “weaker”) • Dollar depreciates ■ ■ ■ Before depreciation: 1 U. S. dollar = 76. 8 Japanese yen After depreciation: 1 U. S. dollar = 70. 5 Japanese yen $1 buys less yen $10, 000 x (70. 5 yen / $1) = 705, 000 yen / 3, 800 yen per share = 185. 5 shares (202. 1 when dollar was “stronger”) LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 5 LESSON 19 –INVESTING INTERNATIONALLY Strong Dollar Impact • Who is helped by a strong dollar? ■ U. S. consumers: they pay less foreign goods and services. ■ U. S. investors who invest in companies in other nations: they pay less foreign currency. ■ U. S. importers: they can sell imported goods and services at lower prices. • Who is hurt by a strong dollar? ■ U. S. producers: they are competing with lower-priced imports. ■ Foreign consumers: U. S. goods and services are more expensive for them to purchase. ■ U. S. exporters: American goods and services become more expensive foreign consumers. LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

SLIDE 19. 6 LESSON 19 –INVESTING INTERNATIONALLY Weak Dollar Impact • Who is helped by a weak dollar? ■ U. S. producers: they are competing with higher-priced imports. ■ Foreign consumers: U. S. goods and services are less expensive for them to purchase. ■ U. S. exporters: American goods and services become less expensive foreign consumers. • Who is hurt by a weak dollar? ■ U. S. consumers: they pay more foreign goods and services. ■ U. S. investors who invest in companies in other nations: the price of foreign currency increases. ■ Foreign exporters: the prices of foreign goods and services are higher. LEARNING, AND INVESTING FOR A NEW GENERATION ©COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY