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1. Digital Study Guide, written by William Walstad
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After reading this chapter, you should be able to:

1. Describe the idea of present value and explain why it is critical in making financial decisions.
2. Identify and distinguish between the most common financial investments: stocks, bonds, and mutual funds.
3. Discuss how investment returns compensate for being patient and for bearing risk.
4. Explain portfolio diversification and why it implies that investors can focus on nondiversifiable risk when evaluating an investment opportunity.
5. Interpret why higher levels of nondiversifiable risk are associated with higher rates of return.