Lesson 18
Managing Risk

The students are introduced to new applications of the concept of diversification. A teacher-led demonstration offers students the option of accepting a briefcase filled with $150,000 or accepting the results of a double down coin flip. This demonstration sets the stage for students to understand risks involved in the choices we make and how to take steps to reduce risk. Students use the concept of diversification to help them understand how risks can be spread out over different stocks and other assets. By reading a dialogue among hypothetical residents of Valley View Estates, the students learn about insurance as another tool for spreading out risk.


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