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The Stock MarketP604, 643 -644
STOCK –part ownership of a corporation
CORPORATION –a business organization owned by shareholders, but treated by law as though it were owned by one person
What is STOCK?
1. Pay debts
2. Raise money
Ex. To expand business
Why SELL ownership?
You Choose?
You Choose?
It’s an investment
Buy stock at one price
Price of stock rises
Sell stock
Your profit is the difference between
purchase price & sale price
CAPITAL GAIN
Why BUY stock?
Buy 1 share @ $30
Price rises to $50/sh.
You sell
Your profit = _____?◦$20
What if you’d initially purchased 100 shares?◦$2,000
Se-ries1
$0
$40 $30$50
Price of Company "X" Stock
TIME
Dol-lars
As an owner you’re entitled to a portion of that corporation’s earnings
DIVIDENDS–◦payment of a portion
of a company’s earnings
What if Apple consisted of 25 shares?
& you owned 1 share
What fraction or percent of Apple’s profits are you entitled to?
1/25th or 4% (2011= $6.2B)
Facebook OwnershipFacebook: 2.8 billion shares / 2, 800, 000, 000
Past century (1900-2000)
Stock Market rate of return = 6%/yr
Investment of $1,000 = ______?
◦earn $60 at yr’s end (on average)
Current average return for savings account
= 1%/yr
Investment of $1,000 = _______?
◦earn $10 at yr’s end
GUARANTEED
Stock Purchaser
Brokerage Firm
Corporation
Purchasing Stock
$ $
StockStock
1. NYSE The New York Stock Exchange
est. in 1792
Co.’s must meet size &
profitability requirements to be
traded on NYSE
Over 3,000 co.’s traded on NYSE
The 3 Major U.S. Stock Exchanges
2. NASDAQ National Association of Securities Dealers
Automated Quotations
est. 1971
Mostly tech. stocks
No floor for trading
Over 5,300 co.’s traded on this market
3.AMEX The American Stock Exchange
Est. 1842
originally known as NYCE (NY Curb
Exchange)
700 co.’s traded on AMEX
Bull Market◦a 20% or more increase over 2-3 month
period
Bear Market◦a 20% or more decrease over a 2-3
month period
Market Trends