1. Investing In Stocks Chapter 31

2. Today’s Schedule Tuesday’s Quiz Review Tuesday’s Quiz Review Assignment of Homework Assignment of Homework Chapter 31 Chapter 31 Quiz Quiz

3. Quiz Name two of the four types of savings account discussed in this chapter Name two of the four types of savings account discussed in this chapter Traditional, Certificate of Deposit (CD), Money Market Fund, Money Market Deposit Account Traditional, Certificate of Deposit (CD), Money Market Fund, Money Market Deposit Account What does FDIC stand for? What does FDIC stand for? Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation Inflation Risk is the risk that the rate of inflation will increase more than the rate of interest on savings Inflation Risk is the risk that the rate of inflation will increase more than the rate of interest on savings Extra Credit – How much does the handbook cost? $6 Extra Credit – How much does the handbook cost? $6

4. Homework Read Chapter 31 & Do Key Word Definitions Read Chapter 31 & Do Key Word Definitions Event Management (5 points) Event Management (5 points) Project how many will be registered at particular points leading up to the event date Project how many will be registered at particular points leading up to the event date Offer contingency (back-up) plans for all areas where something can go wrong Offer contingency (back-up) plans for all areas where something can go wrong Recruit and manage event volunteers Recruit and manage event volunteers Due 12/1/06 Due 12/1/06

5. Chapter 31 Learning Objectives Define stock Define stock Explain how stock is bought and sold Explain how stock is bought and sold Identify the indexes that track stock prices over the long run Identify the indexes that track stock prices over the long run

6. Why It’s Important Making good investment decisions helps you reach your financial goals Making good investment decisions helps you reach your financial goals How is that an accurate statement? How is that an accurate statement?

7. Investing In Stocks Investing – Putting your money to use in order to make money on it Investing – Putting your money to use in order to make money on it Stock – Share of ownership in a business Stock – Share of ownership in a business Businesses sell as a way of enlarging a company Businesses sell as a way of enlarging a company

8. Return on Stocks Yield Yield Return on an Investment Return on an Investment Return depends on type of return and rate of return Return depends on type of return and rate of return

9. Types of Return Two ways to make a return on stocks Two ways to make a return on stocks Payment of Dividends Payment of Dividends Sale of Stock Sale of Stock Government will tax any earnings you make on the two Government will tax any earnings you make on the two

10. Types of Return: Payment of Dividends Dividend Dividend A share of profits A share of profits Dividends are paid when a corporation is extremely profitable Dividends are paid when a corporation is extremely profitable Usually paid quarterly Usually paid quarterly

11. Types of Return: Selling Stock To make a profit: To make a profit: Must sell for more than paid Must sell for more than paid Capital Gain Capital Gain Selling stock for more than you paid Selling stock for more than you paid Capital Loss Capital Loss Selling stock for less than you paid Selling stock for less than you paid Why would one ever do this? Why would one ever do this?

12. Rate of Return Always expressed as a percent of the original investment Always expressed as a percent of the original investment Figured on an annual basis Figured on an annual basis Example: Example: Single share of stock Single share of stock Value increases from $50 - $55 over a year Value increases from $50 - $55 over a year Share pays a $5 dividend that year Share pays a $5 dividend that year $10 return on a $50 investment $10 return on a $50 investment ($10/$50) =.20 ($10/$50) =.20 20% return on investment 20% return on investment

13. Types of Stock Two types: Two types: Common Stock Common Stock Preferred Stock Preferred Stock

14. Common Stock Primary form of ownership in a corporation Primary form of ownership in a corporation Corporations must issue this type (some will only issue this type) Corporations must issue this type (some will only issue this type) For each share you own, you get a vote in running the corp. For each share you own, you get a vote in running the corp. Board of Directors runs the company in the interest of the stockholders Board of Directors runs the company in the interest of the stockholders

15. Preferred Stock Gives shareholders certain privileges that common stockholders do not receive Gives shareholders certain privileges that common stockholders do not receive Dividends usually paid to preferred stock first – if paid at all Dividends usually paid to preferred stock first – if paid at all If a company fails, preferred stockholders get a share of the assets before the commoners If a company fails, preferred stockholders get a share of the assets before the commoners

16. Stockbrokers Broker Broker Person who acts as a go-between for buyers and sellers Person who acts as a go-between for buyers and sellers Process the purchase and sale of stocks Process the purchase and sale of stocks Charge either a percent of the value of the stock or a set amount for each transaction Charge either a percent of the value of the stock or a set amount for each transaction

17. Stock Exchanges Trading market where stocks are bought and sold Trading market where stocks are bought and sold Central location for traders to buy and sell stock Central location for traders to buy and sell stock Only stocks listed on an exchange can be bought and sold Only stocks listed on an exchange can be bought and sold There are rules provided by exchanges There are rules provided by exchanges Usually, Company must be in good financial standing to be traded Usually, Company must be in good financial standing to be traded Best-known: Best-known: New York (NYSE) New York (NYSE) Midwest Stock Exchange (Chicago) Midwest Stock Exchange (Chicago) London Stock Exchange London Stock Exchange Tokyo Exchange Tokyo Exchange

18. Over-the-Counter Markets Definition – all investments bought and sold Definition – all investments bought and sold What about stocks not listed on major exchanges? What about stocks not listed on major exchanges? Can be bought and sold through the National Association of Securities Dealers Automated Quotations (NASDAQ) market Can be bought and sold through the National Association of Securities Dealers Automated Quotations (NASDAQ) market Stocks traded are done so through a created market made by brokerage houses Stocks traded are done so through a created market made by brokerage houses

19. Quiz What are the two factors on which a return on stock depends? (4 points) What are the two factors on which a return on stock depends? (4 points) What are the two types of stock? (4 points) What are the two types of stock? (4 points) There are two ways to make a return on a stock as discussed in the chapter. Name one. (2 point) There are two ways to make a return on a stock as discussed in the chapter. Name one. (2 point) Extra Credit – By what time in the morning should a student’s parent/guardian report an absence to the school office? Extra Credit – By what time in the morning should a student’s parent/guardian report an absence to the school office?

20. Group Work Event Management (5 points) Event Management (5 points) Project how many will be registered at particular points leading up to the event date Project how many will be registered at particular points leading up to the event date Offer contingency (back-up) plans for all areas where something can go wrong Offer contingency (back-up) plans for all areas where something can go wrong Recruit and manage event volunteers Recruit and manage event volunteers Due 12/1/06 Due 12/1/06