1. April 4th, 2017 Landmark Supreme Court Cases TWIZ
Study – Unit Test Tomorrow!

2. April 4th 2017
Turn in Ch 11. Assessment
Notes today – The Stock Market
Current Events
Stock market activity will be passed out at the end of class, due Friday

3. The stock market

4. Corporation financing
Corporations often need to raise funds to increase business and expand supply. They can do this by issuing:
Bonds. Just like the government, a corp. can issue fairly large corporate bonds to consumers. These are not as secure as government bonds
Stock. Stock represents ownership in a corporation. It is issued in portions known as shares. Stocks are also called equities, or claims of ownership in a corporation.
By buying and selling stocks/bonds, both the corporation and the consumer can benefit. There is potential for stockholders to make a hefty profit, and the corporation can raise money to start, run, and expand their business.

5. Types of stock
Stock can be classified in several ways, based on if it pays dividends and if the buyer has voting rights in the corporation.
Dividends are the profits of a corporation that are paid out to their stockholders.
Income Stock – pays dividends at regular times during the year, most often quartlerly.
Growth Stock – pays few or no dividends. Instead, profits earned are reinvested into the corporation. The corporation is more likely to increase in value overtime with this investment. Thus, the business and its stock is going to grow in value.

6. Types of stock
Stock is also classified based on whether or not the stockholders have a cote in company policy.
Common stock – These stockholders are voting owners of the company. Usually they receive one vote for each share of stock owned. This vote will give them power to do things like elect the company’s board of directors(CEO,CFO,COO).
Preferred stock – These stockholders are nonvoting owners of the company. Depending on the issue, these stocks often receive dividends before common stockholders, and can have these fixed. This comes in handy when the company is not doing well.

7. Stock Splits One aspect that we will see corporations use voting power
is when deciding to initiate a stock split. This happens when each single share of stock splits into more than one share. This is done when the price of a single share becomes so high that it discourages potential investors from buying it. While this is primarily a cosmetic difference, a corporation can see benefits from deciding to split.
For example. Suppose you own 100 shares of a company. If each share is worth $100, and the company splits its stock 1-2. After the split you would own 200 shares worth $50 each. Your total value is $10,000 before and after the split.
Although value doesn't change, it is common for prices to rise after a stock split.

8. Benefits of buying stock
Corporations benefit by selling the stock to raise funds. Stockholders can benefit in two primary ways:
1. Dividends.
These are portions of a corporations profits that are paid to stockholders. Often they are paid quarterly (four times a year). The size of the dividend depends on the companies profits, the higher the profit the larger the dividend per share of stock.
2. Capital Gains.
Stockholders can also profit from selling the stock for a higher price than they paid for it originally. This difference in price is called a Capital Gain. If they paid a higher price than they are able to sell it for we call it a Capital Loss.

9. Risks of buying stock
Purchasing stock is extremely risky because the firm is not guaranteed to make any profits, or even to stay in business at all! Dividends can be smaller than you expect or nonexistant.
If the price of the stock decreases, investors who are forced to sell will experience capital loss.
Bankruptcy laws make stocks a risky investment. If a firm goes bankrupt, it sells all assets and then pays its creditors and bondholders first. Stockholders receive payment only if there is money left after all others are paid.
The higher the risk, the higher the reward. Although the returns on stocks are generally higher than on bonds, they are much more likely to go horribly wrong for the investor.

10. How to trade stocks
Stocks are rarely sold directly from the company they represent, only a few major firms sell stock directly. If you're buying a very small number of shares and want to minimize your costs, a direct stock purchase is a great way to go.
To purchase most stocks you would contact a stockbroker, a person who links buyers and sellers of stock. They are employees of brokerage firms or businesses that specialize in trading stocks. These firms are tasked with researching and understanding the market to make informed recommendations to their clients.
These firms will cover their costs by either
charging a commission or fee on each stock transaction
Selling shares of stock at a slightly higher price, profiting from the spread

11. Stock exchanges
Stock is bought and sold on stock exchanges, or markets for buying and selling stock. These act as secondary markets for stocks and bonds.
Major US stock exchanges are:
The New York Stock Exchange (NYSE) is the country’s largest exchange. It began in 1792 as an outdoor exchange under a tree in the financial district. It has since grown to take place indoors and became restricted to a limited number of members who buy seats to allow them to trade.
As the greatest exchange, it only handles stock and bond transactions for the largest and most established companies in the country. The largest being referred to as blue chip companies. These are in highest demand, as we can be sure they will continue to make profits.

12. Stock exchanges
The OTC Market - many stocks are traded over-the-counter, or electronically. Here investors can buy directly from a dealer or from a broker who will search the market for the best price.
Nasdaq – (the National Association of Securities Dealers Automated Quotations) is the American market for the over-the-counter securities. Created in 1971, it has helped provide automation, allowing for trading information to be simultaneously broadcast to thousands of computers throughout the world. Nasdaq has grown into the third largest securities market in the world, connecting US, European, and Asian markets.

13. Futures and options
Futures are contracts to buy and sell commodities at a future date at a price decided today.
Options are contracts that give investors the choice to buy or sell stock and other financial assets. Allowing investors to buy or sell stock at a particular price for a time window, usually 3-6 months.
Call options allow the investor to have some flexibility with their purchase. This option gives you the right but not the obligation to purchase stock at a certain price.
For example, you may pay $10 a share today for a call option. The option could set the price per share at, say, $100 per share. At the end of 6 months, you would decide whether or not to purchase the stock.
If the price increased to $115 per share, your option will let you purchase for $100 still, and you can earn 5$ per share ( $15 – $10).
If the price per share decreased to $80, you would throw away the option and buy the stock at the going rate.

14. Holding stock
Most stockholders hold their investment for a period of time, even years. Expecting that with time it will grow in value.
Daytrading rivals this traditional strategy, where traders try to predict minute-by-minute price changes based on computer programs. These traders hope that by making dozens of trades in a day they can make a profit. Daytraders use a variety of strategies to make these decisions, ranging from trend following of major data to following major news announcements.
While these strategies are both risky, it is more common to see daytraders take on a great loss of money.

15. MEASURING THE MARKET
Bull market – When the stock market rises steadily over a period of time.
Bear market – when the stock market falls steadily for a period of time.
The Dow Jones Industrial Average – has shown how a collection of stocks has traded daily since While the companies have changed, the representation of the market is present and we can measure how well the market is doing by examining The Dow. Today, it holds 30 large companies in various industries: food, entertainment, technology.
The S&P 500 (Standard & Poor’s 500) – gives a broader picture of stock performance by showcasing price changes of 500 different stocks. These are mainly found listed on the NYSE, some are on Nasdaq and OTC markets.

16. The great crash of 1929
The 1920’s saw a long-term bull market, with overall stock value increasing from $27 Billion in 1925, to $87 billion in 1929.
With widespread optimism of prosperity, many practiced speculation, making high-risk investments with borrowed money in hopes of getting a big return. Many small investors used their life-savings to do so.
In October 1929, the prices peaked, borrowers were forced to repay their loans, leaving worried investors to sell beyond what was normal. Stock prices fell to a fraction of what they were bought for.
The crash contributed to the Great Depression, and those who invested in the market were the first to feel the effects. This led stocks to be considered risky by Americans for several decades.

17. Tracking stocks activity
This week your homework is to complete this handout, tracking stocks that you choose. DUE FRIDAY
You will need to choose four companies for this assignment, you will need to read the stock tables, use the example in the handout or in your textbook (page 287).