WARMUP 5/11: WRITE ON THE BACK OF THE LAST PAGE ON THE NOTES SHEET List at least 2 things that you know about the stock market. Then write 3 questions that you have about the stock market.

THE STOCK MARKET Recap Types of stocks How to purchase Stock market exchanges Types of markets

THINK ABOUT THIS…  Wal-Mart began as a single-store business in Arkansas  Dell began when it’s founder, Michael Dell, sold computers out of his dorm room  McDonald’s began as a small unknown restaurant What do these companies have in common? They raised capital by selling stock in themselves!

WHAT IS STOCK?  Stock is ownership in a company  When you own a share of stock, you are a part owner in the company with a claim (however small it may be) on every asset and every penny in earnings.  If the corporation prospers, the investor prospers.  If the corporation fails, the investor can lose his investment.

TYPES OF STOCK  Common stock is the type most people purchase.  Represents ownership of a company and a claim on part of the profits.  Investors get one vote per stock.  Preferred stocks don’t have the same voting rights  Guaranteed a fixed dividend.  If the company is liquidated, they are paid off first.

A stock certificate is a piece of paper that shows partial ownership in a corporation.

PROFITING FROM STOCKS  There are two ways investors can profit from stocks:  Dividends: payments made by corporations to stockholders  Capital Gain: selling a stock for more than its original purchase price However, sometimes a capital loss occurs. A capital loss occurs when an investor sells his stock for less than the original purchase price.

PURCHASING STOCK: BROKERS A Broker is a person who is licensed to buy and sell stocks, provide investment advice, and collect a commission on each purchase or sale  Purchases stocks on an organized exchange (stock market)  Over ¾ of all stocks are bought and sold on an organized exchange

PURCHASING STOCK: NYSE New York Stock Exchange (NYSE)  Oldest and largest, began in 1792  1,366 seats available  2,800 companies  Average stock price is $33.00  Strict requirements

PURCHASING STOCK: NASDAQ National Association of Securities Dealers Automated Quotations  Stocks are traded in an over the counter electronic market  4,000 small companies  Company requirements are not as strict  More volatile because companies are young and new  Average stock price is $11.00

3 BASIC INDICATORS OF ECONOMIC ACTIVITY Dow Jones Industrial Average (“DOW”)  Lists the 30 leading industrial blue chip stocks Standard and Poor’s 500 Composite Index  Covers market activity for 500 stocks  More accurate than DOW because it evaluates a greater variety of stock National Association of Security Dealers Automated Quotations (“NASDAQ”)  Monitors fast moving technology companies  Speculative stocks, show dramatic ups and downs

The Dow is either up or down. If the Dow is up, stocks are selling at higher prices. If the Dow is down, stocks are selling at lower prices.

BULL AND BEAR MARKETS  A bull market occurs when the stock market rises steadily over a period of time.  A bear market occurs when the stock market falls over a period of time.  Stock indexes, like the Dow, allow investors to track the progress of the stock market.

Investors love bull markets. But remember, what goes up, most come down.

While investors may not like bear markets because selling prices are low, bear markets are excellent times for buying shares at lower prices.

ASK AN EAGLE: DAQUAN DENNISON

QUESTIONS FOR REFLECTION: 1.Why do corporations sell stock? 2.What are the types of stock? 3.List two ways investors can make money owning stocks. 4.List two markets from which investors can purchase stocks. 5.Why is the Dow Jones Industrial Average important? 6.What is the difference between a bull market and a bear market? E. NAPP