2.   1. Can you drive on the left side of the road with your car?  2. Can you use your clothes to tie up a student and lock him or her in a locker?  3. Can you use your books to start a fire in someone's living room?  4. Can you use your makeup to color over the computer monitor screen in school? Ownership

3.   A type of security that signifies ownership in a corporation and represents a claim to a part of the company’s profits and losses. Companies usually issues stock to raise money for a variety of reasons, including expanding or modernizing their operations. Stock

4.   Stocks are bought and sold on exchange  American Stock Exchange (AMEX)  New York Stock Exchange (NYSE)  NASDAQ

5.   Common Stock – Share of company that do not guarantee a dividend and have more risk and volatility than preferred stock. Shareholders have the right to vote for the board of directors as well on issues that come before the board  Preferred Stock – Shares of ownership of a company in which the share holder is guaranteed a dividend if one is declared and whose shares are usually not as volatile as common stock Types of Stock

6.   An important difference between common stock and preferred stock is that the price of the preferred stock tend to be more stable, changing little over time, than that of common stock  Preferred stock holders do not have any voting rights. Difference

7.   Stock owned by investors who buys shares or partial ownership of the assets of a business that is traded on one of the stock exchanges Public Stock

8.   Stock is not sold to the general public. The stock is owned by individuals, family, or a small group of investors that have private source of funding growth. Private Stock

9.   Company management goes to investment bankers to negotiate an agreement to underwrite a stock offering is known as an IPO  The investment banks buy all shares that will be offered to the public at a set price (primary market)  The investment banker then sell the stock to the general public Initial Public Offering (IPO)

10.   Volatility – Indicates how much and how quickly the value of an investment, market, or market sector changes  Risk – The chance of losing all or part of an investment  Earnings – The amount of money that remains after subtracting the company’s expenses from it revenue  Dividend – Part of a company’s profits (earnings) that it pays as money to stockholders Key Terms