Do Now

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Do Now

• If you didnt finish your study guide on Friday,
  come up and get it. Finish answering the
  questions. We will correct them in a few minutes.
• If youre done with your study guide, get a
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  necessary) and turn it in.

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Investing in The Stock Market

• Personal Finance Economics

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1

• Billy bought ABC corporation stock at 27/share.
  Later he sold it at 31/share. This is an example
  of.
• Capital gain

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2

• List ways that an investor can make money on
  stocks.
• Dividends
• Capital gain

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3

• _______ are spaced at intervals around the
  trading floor of the NYSE.
• Trading posts

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• The largest securities exchange in the USA.
• NYSE

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• A name for owners of a corporation.
• Shareholders or stockholders

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• The over-the-counter market.
• NASDAQ

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• _______ buy and sell stocks on the exchange. They
  must be members of the exchange.
• Floor brokers

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• Prolonged period of rising stock prices and a
  general feeling of investor optimism.
• Bull market

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• ______________ are the part of the corporations
  profits paid to stockholders.
• Dividends

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• Borrowing money from a broker to buy stock.
• Leverage or buying on margin

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• In order to purchase stock, you must know the
  ______ of the corporation.
• Ticker symbol

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• Period of falling stock prices and a general
  feeling of investor pessimism.
• Bear market

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• A _________ is a stockholders written
  authorization to transfer his or her voting
  rights to someone else, usually a company
  manager.
• Proxy

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• This is an increase in the value of the stock
  above the price initially paid for it.
• Capital gain

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• The _______ is an assigned, arbitrary dollar
  value that is used to calculate dividends.
• Par value

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• This type of stock pays a variable dividend and
  gives the holder voting rights.
• Common stock

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• A marketplace where brokers who are representing
  investors meet to buy and sell securities.
• Stock exchange or security exchange

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• List a long term investing strategy.
• Dollar-cost averaging
• Buy and hold
• Reinvesting dividends
• Direct investment

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• This is when a shareholder sells stock for less
  than what they paid for it.
• Capital loss

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• List an example of a cyclical stock. Explain.
• Travel agency
• travel spending can easily be cut during times
  of recession

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• List a short term investing strategy.
• Short selling
• Leverage or buying on margin

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• This type of stock is a bargain for investors,
  but is dangerous for businesses because it makes
  them vulnerable to takeovers.
• Undervalued stock

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• Buying stock directly from a corporation.
• Direct investment

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• Selling stock borrowed from a broker that must be
  replaced at a later time.
• Short selling

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• ________ is the price investors are willing to
  pay for the stock.
• Market value

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• List an advantage to owning stock as opposed to
  investing in a small business.
• The investor can lose no more than their initial
  investment.

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• The systematic purchase of an equal dollar amount
  of the same stock at regular intervals.
• Dollar-cost averaging

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• ____________ have a consistent history of paying
  high dividends.
• Income stocks

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• A _____ is an increase in the number of shares
  outstanding of a companys stock.
• Stock split

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• _____________ are stocks in corporations that
  reinvest their profits.
• Growth stocks

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• Benchmark that investors use to judge the
  performance of their investments.
• Stock indices

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• Another term for buying on margin.
• Leverage

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• This type of stock.
• Pays fixed dividends.
• Carries no voting rights.
• Less risky
• Much less potential for major earnings.
• Preferred stock

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• Using dividends previously earned on the stock to
  buy more shares.
• Dividend reinvestment

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• If the stock drops to around ½ of the original
  purchase price, the investor receives a _______ -
  the investor must pledge additional cash or
  securities to serve as collateral for the loan.
• Margin call

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• The __________, elected by the stockholders to
  guide the corporation, decides the amount of
  dividends to be paid each year.
• Board of directors

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• List the formula for calculating return on
  investment.
• Profit/cost

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• A __________ is one that remains stable and pays
  dividends during an economic decline.
• Defensive stock

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• This type of stock is selling at a price that is
  not justified by the corporations earnings.
• Overvalued stock

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• A ____________is 100 shares or multiples of 100
  shares of a particular stock.
• Round lot

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• ______________ are stocks of large,
  well-established corporations w/ a solid record
  of profitability.
• Blue Chip stocks

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• ________ do well when the economy is stable or
  growing, but often do poorly during recessions,
  when the economy slows down.
• Cyclical stocks

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• List an example of a defensive stock. Explain.
• Pharmaceutical people need even in times of
  recession

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• List an example of a stock index.
• DJIA
• SP 500

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• Samantha bought XYZ Corporation stock at
  48/share. Later she sold it for 22/share. This
  is an example of what?
• Capital loss

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• List an advantage to direct investment.
• Avoid brokers commissions.

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• What do all short-term investment strategies have
  in common?
• Risky

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48 ROI

• Billy Brandon purchased 200 shares of XYZ Corp
  stock at 32.50/share paid a 500 commission.
  Todays market price is 41.75/share. Last year
  he received dividends of 1.45/share.
• 23.4

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49 Dividends

• There are 6,500 shares of 30 par value preferred
  stock 3,000 shares of common stock. Preferred
  has a 5 guaranteed rate of return. Dividends of
  .75 per share are declared of common stock.

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49 Answer
Common Stock Preferred Stock
Total Dividends 2,250 9,750
Dividends per Share .75 1.50
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50 ROI

• Billy Brandon purchased 250 shares of XYZ Corp
  stock at 15.80/share paid a 283 commission.
  Todays market price is 10.11/share. Last year
  he received dividends of .85/share.
• -35.3

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Final Question

• List and explain 2 long-term investing strategies
  2 short-term investing strategies.