1. Stock Market Day 3 Home Depot Exxon Oil DuPont Microsoft Kraft Wal-Mart Coca Cola HJ Heinz Coca Cola AT&T Walt Disney McDonalds

2. Review from Day 2  True or FalseIn the primary market, investors trade with investors.  A blue-chip stock – Answer True or False for each  Trades for less than $1  Is high quality stock from high quality companies  Example is The Ford Motor Company  Is stock that comes with higher than average risk  A stock that trades for less than a dollar is usually called a ___________ stock

3. Review from Day 2  Commodities include any _____ materials  Which of the following are commodities  OilCar motor  BatteryFish  TeaBinoculars  Spices – salt, pepper, basilCoca Cola beverage  Rubber bootsTulip Bulbs  Wild TurkeysWater  ClothingSilk  Iron OreGlass  Nail PolishPearls

4. Review from Day 2  True or FalseYou can go to jail for insider trading.  True or FalseIt is easy for the Securities Commission to catch an inside trader  True or FalseYou are not guilty of insider trading if you wait to act until the secret information is made public.  True or FalseYou might pay a fine if you are caught for insider trading.

5.  Stock Market Day 3 Equity - Another word for Shares Issued and outstanding – the number of shares that exist for shareholders to buy.

6. Brokers  Act as an intermediary between buyers and sellers  Stockbrokers work for brokerage firms and do the buying and selling of stocks.  You may access brokers in person, by phone or by the internet.  E*Trade is a popular site that offers broker services to the public. E-Trade baby commercials are always a hit during the super bowl.

7. How do brokers make money?  Some brokers charge a FLAT FEE – eg. $10 per trade, but if the broker is giving you advice it may be more like $20-$40 for the trade.  Other brokers charge a % fee on the dollar amount of your trade.  Eg. You buy 100 shares of IBM at $183 per share which makes a total of $18,300. If the broker charges you 2% then you owe him.02 x 18,300=$366. Your total cost of buying the shares is 18,300 + 366 = 18,666.

8. Cash Accounts vs. Margin Accounts  For a broker to be able to buy and sell shares for you, you must set up an account with the brokerage firm. Then they can take from it or add to it as they buy and sell for you.  Cash Account means that your money is sitting in the account for the broker to use  Margin Account means that the money you are using to buy shares is BORROWED from the brokerage firm. This is very risky because if your investments don’t earn enough return to cover your interest charges you will go broke.

9. Common Shares vs. Preferred Shares

10. Dividends – Cash vs. Stock  Dividends are a payout of company profits to shareholders. Usually paid QUARTERLY – 4 times a year  Cash Dividends – Shareholders get cash  Stock Dividends – Shareholders get more shares in the company. The advantage here is that the company doesn’t have to spend its cash to reward shareholders.

11. Market Value  Market value is calculated by taking the  number of shares outstanding x current share price

12. Stock Split vs. Stock Consolidation  Stock Split – when the price of a share gets too high it is sometimes LESS APPEALING to investors. If the company wants to get trading going a gain (give it a kick start) then it will do a 2 for 1 split or 3 for 1 split. This means that  Eg. $50 share will now trade for $25 but each shareholder will have 2 shares now instead of 1. This is usually good for the company because it gets trading going again and and investors start buying which pushes up the stock value.  THERE ARE NOW MORE SHARES OUTSTANDING

13. Stock Consolidation  If the share price of a stock it too low, the company might decide to COMBINE shares.  Eg. There are 100,000 shares outstanding and each share is trading for $7. The company decides to combine 4 for 1. So now the share price is $28 (7x4) per share but there are only 25,000 shares outstanding.  THERE ARE NOW FEWER SHARES OUTSTANDING

14. STOCK QUOTATIONS  The internet and newspapers give you stock quotations by the second (internet) and daily (newspapers)

15. Internet Stock Quotation

16. What is an Index?  A stock market index is an average of a group of shares and its purpose is to give shareholders an idea of where the stock market is TRENDING ON AVERAGE.  Common, Well Known Indexes  Dow Jones – an average of 30 high profile stocks that trade on the NYSE  S&P 500 – an average of 500 US equities  TSX Composite – The Canadian equivalent of the S&P – includes the largest companies on the TSX.

17. Dow Jones Index over 5 days

18. Notice how trends seem to be similar

19. Yield Another term for RATE OF RETURN Eg. A stock goes from $40 to $45 today, its yield for the day is (45-40)/40 =.125 = 12.5% Yield can also be negative Eg. Stock price falls to $125 from a price of $130 today. Its yield is automatically negative since price fell (125-130)/130 =-.039 = -3.9%