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Name: _____________
Feb. 3, 2010
Chapter 11, Sec. 3:
The Stock Market
Warm-Up
Discuss what you believe are the benefits and/or risks of
investing in the stock market? If you were given $5,000 to
invest in the stock market, what 2 corporations would you
buy stock in and why?
OR
Do you believe it is a smart financial move to invest in the
stock market? Why or why not? If you were given $5,000 to
invest in the stock market, what 2 corporations would you
buy stock in and why?
With a partner complete the questions on page 284
Skills for life
1. a _____________ b.________________
2. a _____________ b._______________
c._____________ d. ____________
3. a _____________ b. ______________
c. _____________ d.___________
Key Terms, page 285: Define 3 terms
now, the rest for homework
* Bull market
* Bear market
* Capital gain/loss
* Stock split
* Share
* Stock broker
* NASDAQ
* The DOW
* Great Crash
Why do corporations sell stock?
• raise money for starting, running,
expanding their business
What are the benefits and risks of buying
stock?
Benefits:
• Earn dividends,
profit paid out by
company to their
stockholders
• Capital gains- sell
stocks for more
than you bought
them for (better
than capital loss!)
Risks:
•Earn few or no dividends
if company is not doing
well
•Lose money you
invested because stock
goes down in value
•The riskier the
investment, the more you
can gain… and LOSE
What types of stocks can you buy?
• Income stock vs. growth stock:
Income stock pays dividends, growth stock
doesn’t- the company reinvests in the business
(hopefully increasing value over time, aka
“growth”).
• Common stock vs. preferred stock:
Investors with common stock are voting owners
in company- can help elect board of directors.
Preferred stock gives no vote, but get paid
dividends before owners of common stock.
Stock Splits
• Company can vote to do
stock split , where each
single share is split into
more shares.
• This can bring the price of
a single stock down, so
that more people can
afford to invest
How are stocks traded?
• Stockbroker: person who connects
buyers and sellers of stock; can also help
advise
• Brokerage Firms: businesses that
specialize in trading stocks; both charge a
fee
Stock Exchanges
• Markets for buying and
selling stock
• New York Stock
Exchange (NYSE):
country’s largest and most
powerful exchange, located
on Wall Street
– Trade in “blue chip”
companies: those that are
the most profitable and
established
• Nasdaq – the 2nd largest market in the
U.S.
- stocks are sold online instead of on
trading floor
Don’t be a daytrader
• Daytraders try to predict minute-by-minute
changes in the market
-buy and sell many times a day
• Very risky
How do we measure stock
performance?
• Bull market: stock market is rising
steadily over time
• Bear market: stock is falling steadily over
time
• The Dow: (The Dow Jones Industrial
Average) index is an average of how 30 of
the biggest, most established companies
in U.S. are doing
• S & P 500: (Standard and Poor’s 500)
averages the performance of 500 different
company’s stocks, i.e. shows broader
picture
Stock Market Crash of 1929
• Stock market was soaring during 1920s;
-BUT, a few rich families and companies
held most of wealth
- people going into debt to buy consumer
goods like refrigerators
-companies producing too many consumer
goods
-AND, speculation: lots of people made
high-risk investments on borrowed money
• Prices for stocks far above
their real value
• Stocks began to fall,
making worried investors
sell
• PANIC! On Black Tuesday,
Oct. 29, 1929, record
number of shares sold as
people tried to get back
any of their investment
before stocks fell further
• Helped cause Great Depression
• Millions of Americans lost their jobs,
homes, and farms
• Lasted more than a decade
Homework Problems
Page 287 11.7
Answer the question: Which company
pays the highest dividend?
Page 292, Questions
# 1-5 and # 7 and # 8