Standard 4.0 Investigate opportunities available for saving and investing. 4.3Evaluate methods of investing. a. Stocks and Bonds Our Goals Learn The Rules of the game Learn and apply new indicators P/E ratios & Beta scores Make stock trades They say also

 Start with $100, cash  Can borrow additional $$  Negative cash balances charged %7  Positive cash balances pay %2 Rules

Daily interest = |Cash| * Appropriate Interest Rate/365 Negative = %7 or.07 $1.92 = -10,000 *.07/365 $1.92 charged on your account Positive = %2 or.02 $0.54= 10,000 *.02/365 $.054 added to your account The Formula

 American Stock Exchange  NASDAQ Stock Market  New York Stock Exchange  All trades are end of day transactions.  No matter what time trade is placed. Available Stocks

 Buy order minimum 100 shares  Buy order minimum price $5  End of Day Pricing  Broker’s fee of 1% on all transactions Ex. 100 $10 = $1,000 *.01 = $10 Total cost of trade = $1,010 The Numbers

 Must buy at least 5 different stocks, bonds, or mutual funds  Make the 5 trades by week 5  Minimum $5,000 per trade plus commission fees Tennessee Rules 5x5x5

 Previously Learned  Current Market Value  52 Week High  52 Week Low  Daily high/low  4.3Evaluate methods of investing. Value Indicators

 P/E Ratio  P = Price or current market value of stock  E = Earnings per share Ex. Stock price = $10 Earnings per share = $2 P/E ratio =5 4.3Evaluate methods of investing. New Value Indicators

Ex. Stock price = $10 Earnings per share = $2 P/E ratio =5  Compare 2 within similar industry  Company A -- High ratio = overpriced stock 20/2=10  Company B -- Low ratio = underpriced stock 5/2=2.5  4.3Evaluate methods of investing.

 Beta Scores (risk score)  Measures the volatility of stocks relative to the market. Usually the S&P 500  The S&P 500 is considered to have a beta of 1  >1 is more volatile, <1 less volatile  4.3Evaluate methods of investing. Beta Scores

 >1 is more volatile, <1 less volatile  Higher beta should yield higher return Ex. If the market with a beta of 1 = 8% return then a stock with a beta 1.5 = 12% return beta 0.5 = ?% return 4.3Evaluate methods of investing. Higher the Risk Higher the Yield