* Learning about Business: Buying Stocks & Bonds

transcript

Learning about BusinessBuying Stocks and Bonds

Business Vocabulary: Do you know what these words mean?

bondbusiness expenses companydividendloaninvestinginvestorsinterestU.S. Savings Bond profitrisksalaryshareholdersharesstockthe Stock Market

In 2012, Craig and Omar were broke. They needed to earn money.They decided to sell lemonade.

http://www.aisquared.com/zoomnews/images/1008/money.jpg

They made up a name for their lemonade company.

They called it LeM

They made up a business plan.

1. COMPANY--business

They needed a lot of things.

Some things they already had.

They needed to buy other things…

2. BUSINESS EXPENSES--things you buy for your business

…but they had no money to buy what they needed.

Craig told his friend, Maggie, he needed money for LeM .Maggie said, “Do you want a loan? I will lend you and Omar $100. Pay me back later.”

3. LOAN--money you borrow

After Maggie loaned Craig and Omar the money, they gave her a paper called an IOU. They wrote on the paper, “Next year, we will pay back Maggie $100 plus 10% interest.”

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LeM Bond Certificate $110 for Dynell Bennett

Another name for an I.O.U. is a bond.Next year, Maggie will earn an extra $10 when he ‘cashes in’ his bond for LeMo.

interest = extra money. Charli & Sergei will pay interest because Dynell helped them when they needed money.

4. INTEREST--extra money

Dynell paid $100 for the bond, but next year, he will get back $110.

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Dynell paid $100 for this LeMoo Bond Certificate. After 1 year, it will be worth $110.

Lending money to a business is called ‘buying a bond.

When you buy a bond from a business, the business promises to pay you back with interest after a certain time.

LeMo Bond Certificate $110

5. BOND--money you loan to a business

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Piggy Bank v. Bond Certificate

2011 2012 2011 2012

$100 $100 $100 $110

LeMo Bond Certificate $110

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People like to give U.S. Savings Bonds to babies. This U.S. Savings Bond costs $50.The U.S. government promises to pay you back $50 + interest.After 20 years, when the baby is in college, the bond will be worth $100.

Buying a bond is a way to save and earn money.When you buy a bond, you are lending someone money. They promise to pay you back the money plus interest.

6. U.S. SAVINGS BOND--money you loan to the United States government that pays you interest.

Craig and Omar needed more money.Craig talked to his friend, Anwar. She read Craig and Omar’s business plan.

Anwar offered them $50 for their business.She said, “Don’t pay me back. I think you have a great idea and a good plan. Instead of paying me, let me be your business partner.”

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Craig and Omar thought having a business partner was a good idea.Craig wrote on a paper: “LeM establishes 100 shares of stock. “We sell Anwar 50 shares of LeMo stock. ”

Huh?What is stock??What are shares?

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Craig and Omar thought having a business partner was a good idea.Craig wrote on a paper: “LeM establishes 100 shares of stock. “We sell Anwar 50 shares of LeMo stock. ”

Huh?What is stock??What are shares?

Suppose LeM was a pie.

Suppose LeMo was a very large pie cut into 100 slices.

Each slice is a share.

The pie is LeM stock.

7. STOCK--money in a business

Suppose LeMo was a very large pie cut into 100 slices.

The pie is LeM stock.

Craig and Omar own the other 50 shares.

8. SHARE--a piece of a business

Maresangely paid for 50 shares.

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Maresangely paid $50 for shares in LeMoo Stock. If LeMo makes profits, Maresangely will earn money because she is a shareholder.

L LeMo

Stock Certificate 50 Shares

9. SHAREHOLDER or STOCKHOLDER--a person who owns a part of a business and shares profits.

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L LeMo

Stock Certificate 50 Shares

10. RISK--you may win or you may lose.

Anwar accepts a risk.LeM does not promise to pay her money.When Anwar became a shareholder, she may earn money or she may lose money.

Anwar thought investing in LeMoo was a good risk.

http://www.theproducersperspective.com/my_weblog/2009/05/how-to-invest-in-a-broadway-show-part-ii.html

People love LeMo. .Craig’s and Omar’s business is successful!They sell a lot of lemonade and their business earns a lot of money.

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http://mindmillion.com/MONEY/cartoon_money_dollar.htm

After one year, LeMo earned $500.

They cannot keep all of the money. Craig and Omar must pay business expenses.

$500 = total earnings, 2010 – 2011. 150 = buying lemons, paper cups, stand

$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand

350- 100 = salary for Craig ($50) & Omar ($50) for working.

11. SALARY--paycheck for working at your job

350- 100 = salary for Craig ($50) & Omar ($50)

250 -110 = Maggie's Bond (+ interest)

250 -110 = Maggie’s Bond (+ interest)

250 -110 = Maggie’s Bond

140 PROFIT

350- 100 = salary for Kenya ($50) & Charli ($50)

250 -110 = Dynell’s Bond

$140 PROFIT

Craig & Omar together own 50 shares.Together, they earned $70; each earned $35.00

Anwar owns 50 shares.She earned $70.00. Craig & Omar must pay Anwar her share in the profit.

$35$70

12. PROFIT --extra money you earn after paying business expenses

350- 100 = salary for Kenya ($50) & Charli ($50)

250 -110 = Dynell’s Bond

$140 PROFIT

The money you earn from investing in business is called a dividend.

$70 $70

13. DIVIDEND--business profits shareholders (investors) earn

Anwar kept her dividend.

Craig and Omar used their dividend for their business.

Business earnings go up and down.

http://finance.yahoo.com/tech-ticker/the-government-has-destroyed-business-confidence-former-fdic-boss-isaac-says--but-help-is-on-the-way-535426.html?tickers=^dji,^ixic,^gspc,xlf,SKF&sec=topStories&pos=9&asset=&ccode

Some businesses are not successful.Business owners and stockholders may lose their money.

Businesses are successful when they find out what customers want.Businesses must always make changes to match their customers needs.

Anwar was very happy that she earned a dividend.She became interested in investing more money in business.

14. INVESTING--buying something now that will earn more money in the future.http://www.google.com/imgres?imgurl=http://unexpectedprofits.com/wp-content/uploads/2010/09/Knowing-where-to-invest-your-money-will-benefit-your-business.jpg&imgrefurl=http://unexpectedprofits.com/better-investments/where-

to-reinvest-unexpected-profit-for-maximum-results/attachment/knowing-where-to-invest-your-money-will-benefit-your-business/&usg=__SoLTGjHbqyAK7xHsYnmZPBvdmhE=&h=418&w=586&sz=39&hl=en&start=5&zoom=1&tbnid=L1tQ5vnr_7x46M:&tbnh=96&tbnw=135&ei=G_OJTfOAKJKztwfHj_jcDQ&prev=/images%3Fq%3Dinvest%26um%3D1%26hl%3Den%26safe%3Dactive%26client%3Dfirefox-a%26sa%3DN%26rls%3Dorg.mozilla:en-US:official%26biw%3D1141%26bih%3D561%26tbs%3Disch:1&um=1&itbs=1

http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgA house is a very good investment.Most of the time, you pay a low price for a house.After many years, the house is worth more money

chttp://www.zoomstart.com/buy-low-sell-high/

$100,000

How much you paid for the house in 2011.

How much you earned selling the house in 2021.

$165,000

The Stock Market is where people buy and sell business shares.

15. THE STOCK MARKET--where people buy and sell shares in business

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The New York Stock Exchange on Wall Street in New York City.

http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgThe goal of investors: Buy low, sell high.

chttp://www.zoomstart.com/buy-low-sell-high/16. INVESTORS--people who buy stocks, bonds, houses and other things that will be worth more money in the future.

Investors must be careful about making decisions.

He just lost a lot of money.

http://boagworld.com/season/1/episode/1/

Investors must learn about the business and understand the risks.

http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgIf a business is successful, investors can earn a lot of money.

http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgIf a business is not successful, investors can lose a lot of money.

If you can wait a long time, many investments increase their value.

Business Vocabularybond –lend money, then earn back the money plus interestbusiness expenses –things you must buy for your business company –a businessdividend – business profits shareholders (investors) earnloan –money you lend a person or a company. They will pay it back.interest –extra money you earn from saving or lending.investing –buying something that will earn more money in the future.investors –people who buy stocks, bonds, houses & other things that will be worth more money in the future.U.S. Savings Bond –money you lend the government.profit –extra money you earn after you pay business expenses.risk --you may win or you may losesalary –money you earn from workingshareholder – a business partnershares –pieces of a businessstock –money in a businessthe Stock Market –a place to buy and sell business shares

* Learning about Business: Buying Stocks & Bonds

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