Download Stocks, Bonds, And Futures

Stocks, Bonds, and Futures
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Why Buy Stock?
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Gain a Profit
Limit the Risk on their
investment
Become a part of a
corporation
Profit Potential

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Capital gain- difference
between higher selling
price and lower original
purchase
Capital Loss- sells a
stock at a price lower
that the purchase price
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Limited Risk
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In Corp.
stockholders enjoy
limited liability
Ownership
• Investors have
some ownership in
Corp. and can vote
to elect the board of
directors
• Stock SplitOverhead
How stocks are traded

Brokers and Analysts
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Brokers- link buyers
and sellers of stock
Stock Exchanges

• Work for a firm that
specialize in trading
stocks and other
securities
• Profit off commission
or fee

Investment Banks
• Buys and sells large
blocks of stock
• Buy stock off of
corporations and sell
it to the general
public
NYSE-(1792) largest
stock exchange in the
US
• Before firms this is
were stock was bought
and sold
• Firm buys a “seat” @
NYSE in order to buy
or sell stock
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Over the Counter
Market
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Stocks that are not
listed in the NYSE
Smaller corporations
sell stock here
• 1st buyers or seller
must place an order
with broker
• 2nd broker arrange
the purchase or sell
by using NASDAQ
• Call other brokers
that might have
clients that want the
same stock
Determinants of Stock

Corporate Finances

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Measured in profits
or losses
Quarterly and
annual earning
reports are read
carefully by
investors
• High quality
products and has a
good long term
prospects= buy
Determinants of Stock

Investor
expectations
• Watching fluctuation
in stock index
• Bull market- Dow
steadily rises over a
period of time (buy)
• Bear market- when
the Dow average
falls for a period of
time (sell)

External Forces

Government Statistics
on unemployment,
inflation, interest rates,
and the # of new
houses being built/etc.
Types of Stock

Shares
• # of Portions issued

Dividends
• Profits from your investment

Common Stock

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Share Holders with a voice in how company is
run and a share in a potential dividends
Preferred Stock

Guaranteed dividends with no voice in the
running of company
Why buy Bonds?

Yields
• have lower dividends
than stock
• Less risk

Corporate Bonds

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Come in large units
($1,000.00)
Maturity period
(long)/annual interest
rate
Government Bonds

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US Treasury
Department issues
Bond. Bills, and notes
Why buy futures?
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Futures
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Type of investment
Trade of various types
of products
• Agricultural products
(corn, wheat,
soybeans)
• Industrial Products

Trader accepts
investors money in
exchange for a promise
to deliver commodity to
investor at a later date
• Buy now at a lower
price save later
Review Questions
List the main reasons people choose to
purchase stock.
 How do an investor purchase stock?
 How do corporate finances, investor
expectations, and external forces
influence stock prices?
 How does the futures market offer risks
to sellers as well as to investors?
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