Directions for the Teacher Please pass out the Guided Notes that coincide with this section of notes. These notes will more than likely take the majority of the class period. Once you have completed the notes, please pass out the Company Profiles “prospectus” for the kids to look over. Their homework is to decide which companies they want to “invest” in for tomorrow’s Stock Market Simulation game. They may invest in as little as one company or as many as 5.

The Great Depression Begins and Stock Market Simulation Game

Learning Objectives: Students will be able to describe the characteristics of the 1920s Stock Market Students will be able to describe the causes of the stock market crash by completing a stock market simulation game.

Introduction What is stock? Why would someone want to buy stock? Do you think you will speculate in the stock market some day?

Stock Market Vocabulary

Stock An instrument that signifies an ownership position in a corporation. Most stock also provides voting rights, which give shareholders a proportional vote in certain corporate decisions. Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example, if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5% of the company.

Stock (continued) Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example, if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5% of the company.

Film Clip: What is Stock?

Share Certificate A legal document issued as proof of ownership in a firm. In the modern stock markets, the 'paper' share is now being replaced by the 'electronic' share.

Stock

Stockholder A person who owns stock in a corporation Along with the ownership comes a right to declare dividends and the right to vote on certain company matters, including the board of directors.

Broker The person who works on behalf of an investor in the stock market to buy and sell stock

Film Clip: How Stock Works

Dividends Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Prospectus A prospectus is a printed statement that describes a business A prospectus is distributed to prospective buyers, investors, or participants

Line of Credit A loan of money. Interest (a percentage of the loan) must be paid on the amount of the loan. If you are given a 1000 dollar loan at 10% interest, you pay 100 dollars.

Buying on Margin A risky technique involving the purchase of securities with borrowed money, using the shares themselves as collateral.

Current Day New York Stock Exchange

1920s Stock Market

The Long Bull Market Stock market-established as a system for buying and selling shares of companies Bull market-long periods of rising stock prices The long bull market in the 1920s convinced many Americans to invest heavily in stocks By 1929 about 10 percent of Americans owned stock in the stock market

The Long Bull Market As the market continued to soar, many investors began buying stocks on margin, meaning they only made a small down payment Ex. an investor could buy $10,000 worth of stock by putting down as little as $1,000 The other $9,000 would come as a loan from the stockbroker who would hold the stock as collateral on the buyer

The Long Bull Market As long as stock prices kept rising, buying on margin was safe Throughout most of the decade investors only had to wait a short amount of time before their stock was worth more money They would then sell their stock, repay the loan to the stockbroker, and still make a profit

Margin call The problem came for investors if the stock price began to fall To protect the loan, a stockbroker could issue a margin call He could demand the investor repay the loan at once If prices fell, investors would often try to sell quickly or they may not be able to repay their loan to the stockholder

Getting Rich Quick Many new investors throughout the 1920s did not “do their homework” before buying stock They weren’t paying attention to a companies earnings and profits Instead, they bid prices up without regard to how fiscally sound a company was Buyers hoped to make a fortune overnight and often engaged in speculation Investing money at great risk with the anticipation that the price will rise

Decisions, Decisions, Decisions! Tomorrow, we will be playing the Stock Market Simulation Game. Your HW tonight will be to select which companies you want to “invest in” for tomorrow’s game. Most of the stock companies existed in the 1920’s. Some became successful, others failed. The person with the most money after the year 1929 will be the winner (You will not be able to carry money over from one year to the next)

Directions: The Stock Market Game Read each prospectus and decide which stocks you want to purchase.

Directions: The Stock Market Game Each student will get a worksheet: “The Stock Market Simulation Game”

Directions: The Stock Market Game In the game there will be 7 price changes between 1920 and 1929, when the game ends. There will be no buying and selling of stock during the game. You will sell your stock only at the end of the game and then calculate your total profit or loss.

Directions: The Stock Market Game Each student is given $300 to invest and a pre-approved credit line of $200.

Directions: The Stock Market Game All company stock prices start at $10 per share in 10-share certificates (beginning price of $100 per certificate)

Directions: The Stock Market Game After the 1929 announcement the market closes and each student will calculate the total for all of their stock certificates at the current market value (less any outstanding debt). The student with the most money at the end of the simulation is the WINNER!

Complete your worksheet Now! Remember all company stock prices start at $10 per share in 10-share certificates (beginning price of $100 per certificate) This means you can buy stock in up to 5 different companies. You can choose to use your line of credit ($200) or not! If you don’t use it, you lose it. You must use all your cash ($300) to purchase stock.

The Stock Market is now open!!! You have 5 minutes to buy stock!!! Announcement! The Stock Market is now open!!! You have 5 minutes to buy stock!!!

The Stock Market is now closed!!! Announcement! The Stock Market is now closed!!!