1. Stocks, Bonds and Mutual Funds

2. Write down these questions on your notes (leave answer space)
What are Stocks?
How does the Stock Market Work?
Why Do People Buy Stock?
Where are stocks bought & sold?
How to buy & sell stocks?
What is the difference between a stock and a bond?

3. Brain Pop

4. Student Objectives
Students will understand the cost and benefits of investing in the stock market.
Students will understand the cost and benefits of investing in mutual funds.
Essential Learning #2: What role do incentives, benefits, costs and prices play in a market economy?

5. CA State Standards
12e.2 Students analyze the elements of America's market economy in a global setting
12e.2.9 Describe the functions of the financial markets.

6. 3 Asset Classes
Stocks
Bonds
Mutual Funds

7. What are Stocks?
Stocks
A stock is a claim on the assets of a corporation that gives the purchaser a share of the corporation!
Remember when taking Cornell Notes you need to come up with at least 3 questions per page!

8. Now it is time to watch a video clip on Stocks!!!
Click on the link below:
User ID: FSUSD
Password: School
Make sure you view in Full Screen
Make sure the computer speakers are on!

9. How does the Stock Market Work?
Need
MONEY
If a company wants to raise money it has 3 sources:
Borrow from a bank
Issue Bonds
Sell or Issue stock in the company

10. How does the Stock Market Work?
IPO
An Initial Public Offering (IPO) is a company’s first offering of stock to the public

11. How does the Stock Market Work?
Banks
An investment bank acts as an intermediary between the company that issues the stock & the public

12. Why Do People Buy Stock?
$$$$
Millions of people around the world buy stock every day
Some people buy stocks for the dividends
Payments to stockholders based on a company’s profits
People buy stocks for the expected gain in price (profit)

13. Where are stocks bought & sold?
Venues
The New York Stock Exchange (NYSE)
Other Stock Exchanges
American Stock Exchange (AMEX)
National Association of Securities Dealers Automated Quotations (NASDAQ)
Foreign Exchanges & markets
Stock brokers over the phone, in person, or online

14. How to buy & sell stocks? Buying Stocks
You can buy & sell through brokerage firms or online
An account can be opened with as little as $1000
A full service broker will give you recommendations but will also charge larger commissions
A discount broker or online broker will not give advice & charge smaller fees

15. How do you decide which stocks to buy?
Strategies for
Buying Stocks
Some buy shares of companies they like—Coca Cola, Disney, Microsoft
Mutual Funds—a collection of stocks managed by a fund manager
Several hundred people own shares in the mutual fund
The fund manager controls the selling of the stocks to maximize overall returns
Using a stock index (a portfolio of stocks) which represents a particular portion of the market
DJIA—Dow Jones—industrial stocks
NASDAQ—Technology Stocks

17. The Dow Jones Industrial Average (DJIA)
The Dow Jones is the most popular cited indicator of day-to-day stock market activity
It is a weighted average of 30 widely traded stocks (that do change from time to time) on the NYSE
Charles Dow created it to tell people what was happening w/the market

18. 3M Company (MMM)
Alcoa Inc. (AA)
Altria Group, Inc. (MO)
American Express Co. (AXP)
American Int'l. Group (AIG)
AT&T Inc (T)
Boeing Co. (BA)
Caterpillar, Inc. (CAT)
Citigroup Inc. (C)
Coca-Cola Co. (KO)
DuPont deNemours (DD)
Exxon Mobil Corp. (XOM)
General Electric Co. (GE)
General Motors (GM)
Hewlett-Packard Co. (HPQ)
Home Depot, Inc. (HD)
Honeywell Int'l. Inc. (HON)
Intel Corp. (INTC)
International Bus. Mach. (IBM)
J.P. Morgan Chase & Co. (JPM)
Johnson & Johnson (JNJ)
McDonalds Corp. (MCD)
Merck & Co. Inc. (MRK)
Microsoft Corp. (MSFT)
Pfizer Inc. (PFE)
Procter & Gamble Co. (PG)
United Technologies Corp. (UTX)
Verizon Communications Inc. (VZ)
Wal-Mart Stores, Inc. (WMT)
Walt Disney Co. (DIS)

20. How to Read the Stock Market INDEX Page—you do not need to take notes on this!
Symbol
Index Name
Last
Change
Change %
Quote Date
COMP
Nasdaq Composite Index
2,651.66
+70.00
+2.71%
9/18/2007 5:17:00 PM
DJIA
Dow Jones Industrial Average
13,739.39
+2.51%
9/18/2007 4:06:00 PM
DJTA
Dow Jones Transportation Average
4,932.86
+3.92%
9/18/2007 4:04:00 PM
DJUA
Dow Jones Utilities Average
504.87
+9.94
+2.01%
IXCO
Nasdaq Computer Index
1,179.77
+26.17
+2.27%
MID
S&P Midcap 400 Index-Mid
881.38
+25.41
+2.97%
9/18/2007 4:45:47 PM
MSH
Amex Morgan Stanley Hi Tech 35
651.96
+16.00
+2.52%
NDX
CBOE Nasdaq 100 Index
2,035.37
+52.29
+2.64%
NYA
Nyse Composite Index New
9,909.03
+3.14%
9/18/2007 5:06:00 PM
OEX
S&P 100 Index
710.08
+18.96
+2.74%
9/18/2007 4:59:00 PM
Symbol= ticker symbol for the index
Last= the price it stopped trading at
Change= the difference between the current closing price & the previous day’s closing price
Change %= the percentage change between the current closing price & the previous day’s closing price
This is an index list.

21. How to Read the Stock Market listing— You do not need to take notes on this!
NYSE=New York Stock Exchange
BBY=Ticker symbol for Best Buy
Best Buy Co., Inc (NYSE:BBY)
/ +6.56% Sep 18
Prev. Close:
44.54
Open:
46.98
High:
47.56
Low:
45.69
Volume:
24,116,794
52wk Range:
P/E Ratio:
17.51
Dividend Yield:
1.10%
                                       
47.46 = price the stock closed at today
+2.92 = the Net Change the difference between the current closing price & the previous day’s closing price.
+6.56% = the Net percentage Change the difference between the current closing price & the previous day’s closing price.
Volume = the number of shares that were bought & sold today
Previous Close = what the stock closed at yesterday
52wk Range = the lowest to highest price this stock has traded at during the past 52 weeks
Open = The price it started trading at today
P/E Ratio = the price-earnings ratio, & is obtained by taking the latest closing price per share and dividing it by the latest available net earning per share. A high PE ratio usually indicates a stock that is experiencing a higher than average growth in earnings.
High = the high price the stock traded for today
Dividend Yield: the dividend divided by the closing price
Low = the low price the stock traded for today

22. Now it is time to watch a video clip on Stock market!!!
Click on the link below:
User ID: FSUSD
Password: School
Make sure you view in Full Screen
Make sure the computer speakers are on!

23. Bonds
Bonds
A bond is an IOU, or a promise to pay, issued by companies, governments, or government agencies to borrow money.

24. Components of a Bonds Bonds
Face Value or Par Value—the dollar amount specified on a bond.
This is the total amount the bond issuer will repay to the bond buyer.
Buying Paper EE Bonds
Sold at half their face value; i.e., you pay $25 for a $50 bond but it's not worth its face value until it has matured (which can take years depending on interest rates). EE Bonds can earn more than face value.
Purchase in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000.
$30,000 maximum purchase in one calendar year.
Issued as paper bond certificates.

25. Types of Bonds Types of Bonds
Corporate Bonds—issued by a private corporation
usually have a face value of $10,000
Municipal Bonds—issued by state & local governments
Not subject to federal taxes!!!
Treasury bills, notes & bonds—issued by the federal government
Bills mature in 13, 26 or 52 weeks
Notes mature in 2 to 10 years
Bonds mature in 10 to 30 years

26. Review—True or False
The NYSE is the largest marketplace for the sale & purchase of stocks in the world.
There are 11 companies in the DOW Jones.
One reason to buy stock is for the expected gain in its price.
The face value of a bond is also called the par value.

27. Review—True or False
The NYSE is the largest marketplace for the sale & purchase of stocks in the world.
TRUE
There are 11 companies in the DOW Jones.
FALSE
One reason to buy stock is for the expected gain in its price.
The face value of a bond is also called the par value.

28. Summary
When completing your notes you need to write a 3-5 sentence summary of the lecture. This is a part of your notes grade!

30. If you are interested in short sales:

31. Next steps… Get into your group Read your packet
12 groups of 3
Read your packet
Assign who will do what job
Come up with a Team Name
Make a Team Nametag
Team name and number
Your names and jobs
Period
Companies in which you will invest (you can add to this later)