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