Who Put the Wall in Wall Street? Lesson 14 Slide 14A

What Does That Mean? TermDefinition Wall Streetthe New York City financial district where stock exchanges, banks, and investment companies are headquartered; a global symbol of commerce and capitalism. securitya tradable financial instrument which represents financial value; a stock, bond, or note. negotiablefreely transferable; tradable. bondsa form of debt that companies and governments issue to borrow money from the public. Slide 14B

What Does That Mean? TermDefinition Treasuriesnotes and bonds issued by the U.S. Department of the Treasury. stock exchangea financial market where securities are bought and sold. New York Stock Exchange NYSE; the world’s largest stock exchange, by volume and value. NASDAQ a global electronic exchange for buying and selling securities primarily within the technology (IT) sector. Slide 14C

What Does That Mean? Slide 14D TermDefinition Securities and Exchange Commission SEC; the U.S. government agency that regulates the securities markets to protect investors. dividend a payment made by a corporation to shareholders as a distribution of its profits. coupon rateThe interest rate on a bond. defaultfailure to make a payment when and as due. ticker symbol a combination of letters that identify a specific stock on an exchange; also called stock symbol.

Reminder Slide 14E  Remember to visit ards/ ards/ to access the online flashcards!

Lesson 14 Objectives  Compare debt and equity securities.  Explain the origin of stock.  Relate the history of Wall Street.  List the five largest stock markets in the world.  Summarize the key responsibilities of the U.S Securities and Exchange Commission. Slide 14F

Buy, buy! Sell, sell! What is Wall Street? Slide 14G A. An iconic American street. B. Home to DiCaprio’s “Wolf” C. The New York City financial district where stock exchanges, many banks, and investment companies are headquartered D. All of the above

Slide 14H A Security Is…  tradable (negotiable) financial instrument  equity securities = shares in corporation  debt securities = notes and bonds (basically IOUs)

State and Municipal Bonds  Used as an alternative to raising taxes for public works  Special bond district  Global opportunities for investment  All bonds are rated with letter grades  Risk and return are associated Slide 14I

Securities Exchanges  Public forums for trading stock, notes, and bonds  Stocks first traded in Belgium as joint stock companies designed spread the risk of loss on an investment  Wall Street is the site of NYSE founded in 1792 Slide 14J

How a Company Sells Shares Through a Stock Exchange  IPO = Initial Public Offering  Registers with the SEC  Applies for membership with exchange  Is assigned a ticker symbol  Sells shares to public for resale (on and on- not reverting to the corporation) Slide 14K

World’s Biggest Stock Exchanges  NYSE  NASDAQ  Tokyo Stock Exchange (TSE)  London Stock Exchange (LSE)  Hong Kong Stock Exchange (HKSE) Slide 14L

The Big Picture Slide 14M Securities can be debt, which are notes and bonds, or equity, which are shares of a corporation. An investor who holds bonds or notes is entitled to interest and repayment. There are two kinds of stock: common and preferred. Common stock receives a dividend only at the vote of the board of directors. A stock investor buys shares hoping the value of the stock will rise over time. Governments issue bonds to borrow money from the public. Treasuries are bonds, bills, and notes issue by the U.S. Department of the Treasury. Securities are traded via securities exchanges. The joint stock company is the forerunner to the modern day corporation. There are many stock exchanges around the world, but the NYSE, started by a group of merchants and business owners in 1792, is the largest.

Ponder and Predict  There are about 2800 companies listed on the NYSE, and hundreds of thousands more listed on other stock exchanges around the world, such as the NASDAQ, AMEX, Tokyo and London Stock Exchanges. So many companies! How does an investor decide which stock to buy? How do they determine if a share of stock is worth what it’s trading for? Slide 14N