6.7 Stocks If a corporation needs to make money, they will often borrow it by selling bonds. They promise to repay the borrowed money back plus interest. Corporations can also raise funds by issuing stock, which is a certificate of ownership in a corporation. Stock is issued in portions known as shares.

Benefits of Investing in Stocks There are 2 ways for stockholders to make a profit: Dividends: corporations pay out part of their profits as dividends to their stockholders. This is usually done quarterly (4 times a year). The size of the dividend depends on the profits Capital gains: sell stock for more than you paid for it. The difference between the higher selling price and the lower purchase price is the capital gain. On the contrary, if you sell it at a lower price it is called a capital loss.

Risk of Stocks Purchasing stock is risky, because the firm selling may earn lower profits than expected, or it may lose money. If so, the dividends will be smaller or nothing at all and the market price of the stock might decrease. Greater risk, but potential for greater reward Because of bankruptcy laws, if a firm goes bankrupt, it sells its assets and then pays its creditors, including bondholders, first. Stockholders receive a share of the assets only if there is money left over. Footer Text 11/9/2018

National Association of Securities Dealers Automated Quotation, 1971 Stock Trading So you want to buy stock… what do you do? To get into the stock market, first you contact a stockbroker, a person who links buyers & sellers of stock. They can advise you on your purchase or just carry out the transaction. They make a profit by charging you commission, or fee, on each transaction. A market for buying or selling stock is known as the Stock exchange The major US stock exchanges are the New York Stock Exchange (NYSE) & Nasdaq 1792 National Association of Securities Dealers Automated Quotation, 1971

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Tracking Stock Performance Bull Market: When stock prices in general steadily rise for a period of time Bear market: when stock prices steadily fall or stagnate for a period of time

Tracking Stock Performance Dow jones Industrial Average: “The stock market rose today” Often referring to the a measure of stock performance, aka “The Dow” The Dow is the average value of a particular set of stocks, & it is reported as a certain number of points Looks at 30 blue chip stocks

S&P 500 Gives a broader picture of stock performance than the Dow Stock Market Index Gives a broader picture of stock performance than the Dow Tracks 500 different stocks

Stock Market Crash Bull market, value of stock 1925 = $27 billion Widespread optimism, but small number of companies and families held most of the wealth Farmers & workers were suffering Many people had debt from buying consumer goods on credit Industries were making more goods than people could buy = Surplus Widespread speculation Making high-risk investments with borrowed money in hopes of a big return http://www.history.com/topics/1929-stock-market-crash/videos

http://www. nasdaq. com/aspx/flashquotes. aspx http://www.nasdaq.com/aspx/flashquotes.aspx?symbol=GOOG&selected=GOOG