Do Now If you didn’t finish your study guide on Friday, come up and get it. Finish answering the questions. We will correct them in a few minutes. If you’re done with your study guide, get a laptop and print your spreadsheet. Make sure your name is TYPED at the top. Staple it (if necessary) and turn it in.

Personal Finance & Economics Investing in Stocks

1 Billy bought ABC corporation stock at $27/share. Later he sold it at $31/share. This is an example of. Capital gain

2 List ways that an investor can make money on stocks. Dividends Capital gain

3 _______ are spaced at intervals around the trading floor of the NYSE. Trading posts

4 The largest securities exchange in the USA. NYSE

5 A name for owners of a corporation. Shareholders or stockholders

6 The over-the-counter market. NASDAQ

7 _______ buy and sell stocks on the exchange. They must be members of the exchange. Floor brokers

8 Prolonged period of rising stock prices and a general feeling of investor optimism. Bull market

9 ______________ are the part of the corporations profits paid to stockholders. Dividends

10 Borrowing money from a broker to buy stock. Leverage or buying on margin

11 In order to purchase stock, you must know the ______ of the corporation. Ticker symbol

12 Period of falling stock prices and a general feeling of investor pessimism. Bear market

13 A _________ is a stockholder’s written authorization to transfer his or her voting rights to someone else, usually a company manager. Proxy

14 This is an increase in the value of the stock above the price initially paid for it. Capital gain

15 The _______ is an assigned, arbitrary dollar value that is used to calculate dividends. Par value

16 This type of stock pays a variable dividend and gives the holder voting rights. Common stock

17 A marketplace where brokers who are representing investors meet to buy and sell securities. Stock exchange or security exchange

18 List a long term investing strategy. Dollar-cost averaging Buy and hold Reinvesting dividends Direct investment

19 This is when a shareholder sells stock for less than what they paid for it. Capital loss

20 List an example of a cyclical stock. Explain. Travel agency travel spending can easily be cut during times of recession

21 List a short term investing strategy. Short selling Leverage or buying on margin

22 This type of stock is a bargain for investors, but is dangerous for businesses because it makes them vulnerable to takeovers. Undervalued stock

23 Buying stock directly from a corporation. Direct investment

24 Selling stock borrowed from a broker that must be replaced at a later time. Short selling

25 ________ is the price investors are willing to pay for the stock. Market value

26 List an advantage to owning stock as opposed to investing in a small business. The investor can lose no more than their initial investment.

27 The systematic purchase of an equal dollar amount of the same stock at regular intervals. Dollar-cost averaging

28 ____________ have a consistent history of paying high dividends. Income stocks

29 A _____ is an increase in the number of shares outstanding of a company’s stock. Stock split

30 _____________ are stocks in corporations that reinvest their profits. Growth stocks

31 Benchmark that investors use to judge the performance of their investments. Stock indices

32 Another term for buying on margin. Leverage

33 Preferred stock Pays fixed dividends. Carries no voting rights. This type of stock……. Pays fixed dividends. Carries no voting rights. Less risky Much less potential for major earnings. Preferred stock

34 Using dividends previously earned on the stock to buy more shares. Dividend reinvestment

35 If the stock drops to around ½ of the original purchase price, the investor receives a _______ - the investor must pledge additional cash or securities to serve as collateral for the loan. Margin call

36 The __________, elected by the stockholders to guide the corporation, decides the amount of dividends to be paid each year. Board of directors

37 List the formula for calculating return on investment. Profit/cost

38 A __________ is one that remains stable and pays dividends during an economic decline. Defensive stock

39 This type of stock is selling at a price that is not justified by the corporation’s earnings. Overvalued stock

40 A ____________is 100 shares or multiples of 100 shares of a particular stock. Round lot

41 ______________ are stocks of large, well-established corporations w/ a solid record of profitability. Blue Chip stocks

42 ________ do well when the economy is stable or growing, but often do poorly during recessions, when the economy slows down. Cyclical stocks

43 List an example of a defensive stock. Explain. Pharmaceutical – people need even in times of recession

44 List an example of a stock index. DJIA S&P 500

45 Samantha bought XYZ Corporation stock at $48/share. Later she sold it for $22/share. This is an example of what? Capital loss

46 List an advantage to direct investment. Avoid broker’s commissions.

47 What do all short-term investment strategies have in common? Risky

#48 ROI Billy Brandon purchased 200 shares of XYZ Corp stock at $32.50/share & paid a $500 commission. Today’s market price is $41.75/share. Last year he received dividends of $1.45/share. 23.4%

#49 Dividends There are 6,500 shares of $30 par value preferred stock & 3,000 shares of common stock. Preferred has a 5% guaranteed rate of return. Dividends of $.75 per share are declared of common stock.

#49 Answer $2,250 $9,750 $.75 $1.50 Common Stock Preferred Stock Total Dividends $2,250 $9,750 Dividends per Share $.75 $1.50

#50 ROI Billy Brandon purchased 250 shares of XYZ Corp stock at $15.80/share & paid a $283 commission. Today’s market price is $10.11/share. Last year he received dividends of $.85/share. -35.3%

Final Question List and explain 2 long- term investing strategies & 2 short-term investing strategies.