1. Lecture #10: Stocks & Bonds
Review pages in your textbook for more information!

2. What are Stocks?
Stocks
A stock is a claim on the assets of a corporation that gives the purchaser a share of the corporation!
Remember when taking Cornell Notes you need to come up with at least 3 questions per page!

3. Now it is time to watch a video clip on Stocks!!!
Click on the link below:
User ID: FSUSD
Password: School
Make sure you view in Full Screen
Make sure the computer speakers are on!

4. How does the Stock Market Work?
Need
MONEY
If a company wants to raise money it has 3 sources:
Borrow from a bank
Issue Bonds
Sell or Issue stock in the company

5. How does the Stock Market Work?
IPO
An Initial Public Offering (IPO) is a company’s first offering of stock to the public

6. How does the Stock Market Work?
Banks
An investment bank acts as an intermediary between the company that issues the stock & the public

7. Why Do People Buy Stock?
$$$$
Millions of people around the world buy stock every day
Some people buy stocks for the dividends
Payments to stockholders based on a company’s profits
People buy stocks for the expected gain in price (profit)

8. Where are stocks bought & sold?
Venues
The New York Stock Exchange (NYSE)
Other Stock Exchanges
American Stock Exchange (AMEX)
National Association of Securities Dealers Automated Quotations (NASDAQ)
Foreign Exchanges & markets
Stock brokers over the phone, in person, or online

9. How to buy & sell stocks? Buying Stocks
You can buy & sell through brokerage firms or online
An account can be opened with as little as $1000
A full service broker will give you recommendations but will also charge larger commissions
A discount broker or online broker will not give advice & charge smaller fees

10. How do you decide which stocks to buy?
Strategies for
Buying Stocks
Some buy shares of companies they like—Coca Cola, Disney, Microsoft
Mutual Funds—a collection of stocks managed by a fund manager
Several hundred people own shares in the mutual fund
The fund manager controls the selling of the stocks to maximize overall returns
Using a stock index (a portfolio of stocks) which represents a particular portion of the market
DJIA—Dow Jones—industrial stocks
NASDAQ—Technology Stocks

11. The Dow Jones Industrial Average (DJIA)
The Dow Jones is the most popular cited indicator of day-to-day stock market activity
It is a weighted average of 30 widely traded stocks (that do change from time to time) on the NYSE
Charles Dow created it to tell people what was happening w/the market

12. 3M Company (MMM)
Alcoa Inc. (AA)
Altria Group, Inc. (MO)
American Express Co. (AXP)
American Int'l. Group (AIG)
AT&T Inc (T)
Boeing Co. (BA)
Caterpillar, Inc. (CAT)
Citigroup Inc. (C)
Coca-Cola Co. (KO)
DuPont (E.I.) deNemours (DD)
Exxon Mobil Corp. (XOM)
General Electric Co. (GE)
General Motors (GM)
Hewlett-Packard Co. (HPQ)
Home Depot, Inc. (HD)
Honeywell Int'l. Inc. (HON)
Intel Corp. (INTC)
International Bus. Mach. (IBM)
J.P. Morgan Chase & Co. (JPM)
Johnson & Johnson (JNJ)
McDonalds Corp. (MCD)
Merck & Co. Inc. (MRK)
Microsoft Corp. (MSFT)
Pfizer Inc. (PFE)
Procter & Gamble Co. (PG)
United Technologies Corp. (UTX)
Verizon Communications Inc. (VZ)
Wal-Mart Stores, Inc. (WMT)
Walt Disney Co. (DIS)

18. How to Read the Stock Market INDEX Page
Symbol
Index Name
Last
Change
Change %
Quote Date
COMP
Nasdaq Composite Index
2,651.66
+70.00
+2.71%
9/18/2007 5:17:00 PM
DJIA
Dow Jones Industrial Average
13,739.39
+2.51%
9/18/2007 4:06:00 PM
DJTA
Dow Jones Transportation Average
4,932.86
+3.92%
9/18/2007 4:04:00 PM
DJUA
Dow Jones Utilities Average
504.87
+9.94
+2.01%
IXCO
Nasdaq Computer Index
1,179.77
+26.17
+2.27%
MID
S&P Midcap 400 Index-Mid
881.38
+25.41
+2.97%
9/18/2007 4:45:47 PM
MSH
Amex Morgan Stanley Hi Tech 35
651.96
+16.00
+2.52%
NDX
CBOE Nasdaq 100 Index
2,035.37
+52.29
+2.64%
NYA
Nyse Composite Index New
9,909.03
+3.14%
9/18/2007 5:06:00 PM
OEX
S&P 100 Index
710.08
+18.96
+2.74%
9/18/2007 4:59:00 PM
Symbol= ticker symbol for the index
Last= the price it stopped trading at
Change= the difference between the current closing price & the previous day’s closing price
Change %= the percentage change between the current closing price & the previous day’s closing price
This is an index list.

19. How to Read the Stock Market listing— Take notes on this
How to Read the Stock Market listing— Take notes on this!!! You will need a full page! Leave lots of room to take notes
NYSE=New York Stock Exchange
BBY=Ticker symbol for Best Buy
Best Buy Co., Inc (NYSE:BBY)
/ +6.56% Sep 18
Prev. Close:
44.54
Open:
46.98
High:
47.56
Low:
45.69
Volume:
24,116,794
52wk Range:
P/E Ratio:
17.51
Dividend Yield:
1.10%
                                       
47.46 = price the stock closed at today
+2.92 = the Net Change the difference between the current closing price & the previous day’s closing price.
+6.56% = the Net percentage Change the difference between the current closing price & the previous day’s closing price.
Volume = the number of shares that were bought & sold today
Previous Close = what the stock closed at yesterday
52wk Range = the lowest to highest price this stock has traded at during the past 52 weeks
Open = The price it started trading at today
P/E Ratio = the price-earnings ratio, & is obtained by taking the latest closing price per share and dividing it by the latest available net earning per share. A high PE ratio usually indicates a stock that is experience a higher than average growth in earnings.
High = the high price the stock traded for today
Dividend Yield: the dividend divided by the closing price
Low = the low price the stock traded for today

20. Now it is time to watch a video clip on Stock market!!!
Click on the link below:
User ID: FSUSD
Password: School
Make sure you view in Full Screen
Make sure the computer speakers are on!

21. Bonds
Bonds
A bond is an IOU, or a promise to pay, issued by companies, governments, or government agencies to borrow money.

22. Components of a Bonds Bonds
Face Value or Par Value—the dollar amount specified on a bond.
This is the total amount the bond issuer will repay to the bond buyer.
Buying Paper EE Bonds
Sold at half their face value; i.e., you pay $25 for a $50 bond but it's not worth its face value until it has matured (which can take years depending on interest rates). EE Bonds can earn more than face value.
Purchase in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000.
$30,000 maximum purchase in one calendar year.
Issued as paper bond certificates.

23. Types of Bonds Types of Bonds
Corporate Bonds—issued by a private corporation
usually have a face value of $10,000
Municipal Bonds—issued by state & local governments
Not subject to federal taxes!!!
Treasury bills, notes & bonds—issued by the federal government
Bills mature in 13, 26 or 52 weeks
Notes mature in 2 to 10 years
Bonds mature in 10 to 30 years

24. Review—True or False
The NYSE is the largest marketplace for the sale & purchase of stocks in the world.
TRUE
There are 11 companies in the DOW Jones.
FALSE
One reason to buy stock is for the expected gain in its price.
The face value of a bond is also called the par value.

25. Summary
When completing your notes you need to write a 3-5 sentence summary of the lecture. This is a part of your notes grade!

26. The Game of Life— My Personal Economic Plan
Semester Project REMINDER

27. Part 4: Playing the Stock Market—is it gambling or investing?
Step 1: Read page 439 in your textbook and answer the following question (10 points):
After reading the article, what is your investment strategy?

28. Part 4: Playing the Stock Market—is it gambling or investing?
Step 2: Darts or Analysts (40 points):
You have inherited $20,000. You are going to invest the money in the stock market.
Pick 10 stocks using the dart method (pick them randomly). Using $10,000 purchase 10 different stocks randomly. You do not have to spend $1000 on each stock you can divvy up the money however you like.
Go online and search for “top stock picks,” choose 10 of them. Using the other $10,000 purchase 10 stocks. You do not have to spend $1000 on each stock you can divvy up the money however you like.
This is a great website to track your stocks!
Keep your stocks for at least 2 weeks. You must sell all of them at the same time
You will need to recreate the following chart 2 times (one chart for your random picks and one chart for you “top stock picks”) and fill in the information:

29. REMEMBER YOU NEED TO CREATE 2 Investment Charts—
Part 4: Playing the Stock Market—is it gambling or investing?
REMEMBER YOU NEED TO CREATE 2 Investment Charts—
1. Top Stock Picks
2. Random Picks
Top Stock Picks
Company
Stock Symbol
Date Purchased
(you must buy them all on the same day)
Price Purchased
Number of shares purchased
Total Purchase price
(# of share times purchased price)
Date Sold
(you must sell them all on the same day)
Price Sold
Total
Sold Price (# of shares times sold price)
Profit or Loss
Sold Price minus Purchased Price (it could be a negative number)
IBM
8/16/07
109.69 10
9/10/07
115.54
+58.50
Gap
GPS
16.27 50
813.50
10.25
512.5
GRAND TOTAL
PROFIT or LOSS
-242.5

30. Part 4: Playing the Stock Market—is it gambling or investing?
Step 3: Type up a 1-2 page response to your findings from your stock market simulation. Do not simply answer the questions—write a 1-2 page paper/essay (50 points).
Which method worked better? Which method had the biggest profits?
Would you use the dart method to invest in stocks?
Why do some people pay experts to pick their stocks?
What did your learn from this experience?