Part I



Part II - Investing & Investments Name: Date: 1 Read: What Exactly Does It Mean to Own a Stock? What words come to mind when you hear the phrase “stock market?” Have you ever owned a stock? If yes, what has your experience been like? 2How the Stock Exchange WorksWatch this German video on how the stock exchange works; the facts are true in the US, too. Then answer the questions. How does selling shares on the stock exchange benefit companies? How does buying shares in a company benefit an investor? As an investor, what is the risk involved with the stock exchange? 3What is the difference between Public vs. Private Companies? A NYSE Exec Explains Twitter’s IPO Process. Watch this news coverage from the day before Twitter became a publicly traded company. What is an IPO? Using the example of Dave’s food trucks from the video answer the questions below.What did Dave gain by conducting an IPO? What did Dave lose by issuing stock in his food truck business?What are some other strategies Dave could have used in order to expand his business? 4Wall Street Trader’s NYSE TourWatch Teddy Weisberg, who has worked on the floor of the New York Stock Exchange for 40 years, give a tour of the exchange. What are the steps taken by a broker when he receives an order for a stock? List some of the skills or personality traits you think it takes to become a successful floor broker. 54 Stocks, 4 Trades: Nike, Netflix, & MoreWatch this CNBC news report, in which analysts try to make predictions on stock prices based on current events. Describe 2-3 factors from the video and how the analysts predict they will impact individual stock prices. After watching the video, someone could assume it’s always easy to predict stock prices if you pay attention to current events. What makes that statement untrue? 6What Is a Stock Market Index? In contrast to the video above, in which analysts suggest you should buy and trade individual stocks daily due to current events, stock exchanges allow a much more balanced and laid back approach to investing. # of CompaniesType of CompaniesDow Jones Industrial AverageS&P 500 Nasdaq Composite IndexWhat makes indexes useful for investors? 7How Do You Make Money on Stocks? Note: Publicly traded companies sell shares on the stock exchange in order to raise money. Investors buy shares in hopes of making money. You can invest in in individual companies (risky) or in stock indexes to spread out your risk. What are two ways that investors make money from stocks? 8 The Basics of BondsDo you own any bonds? If so, what kind? What kinds of bonds are there? 9 How Bond Investing WorksThis video is filled with information on how bonds work. You may need to pause the video to answer the questions below.How do bonds differ from stocks?Use your own words to define the following terms:Par value: Coupon: Default risk: Maturity Date: Call Privileges: What two factors impact the coupon assigned to your bond?10 Bond Basics: How Do I Buy Bonds Read this article and then list at least 3 different ways you can purchase bonds. 11 Bond Basics: Different Types of BondsYou’ve already watched a video on treasury bonds. Now, skim this article to learn about municipal, corporate, and zero-coupon bonds. For each type, write at least one pro and one con. PROCONMunicipal BondsCorporate BondsZero-Coupon Bonds12 Relationship Between Bonds & Interest RatesOne of the “Things to Know” was the inverse relationship between bond prices and interest rates. Read this article to understand this concept in more depth, and then answer the questions below.Shaili bought a bond from Penny’s Pickles, Inc at par value ($1000) with a coupon rate of 6% and a maturity date 10 years in the future.If interest rates are currently 3.5%, and Shaili sold the bond today, would she expect to get more than, less than, or equal to $1000 for it?At her bond’s maturity date, interest rates are 6.5%. Should Shaili expect Penny’s Pickles, Inc to return more than, less than, or equal to $1000 to her?Describe, in your own words, why interest rates and bond prices have an inverse relationship.13 Bond Mutual FundsAnother purchasing option is to purchase a bond mutual fund. Read the description provided by Vanguard and record at least three benefits of buying a fund instead of individual bonds.14 Bond RatingsThroughout this lesson on bonds, the concept of risk keeps arising. Watch this video and answer:NOTE: Bonds are less risky than stocks, but they’re more risky than a savings account. Federal treasury bonds are considered the least risky, while corporate and municipal bonds are slightly more risky and junk bonds carry high levels of risk. Interest rates and bond prices have an inverse relationship -- as interest rates rise, bond prices decrease, and vice versa.Who assesses bond risk?How are bonds rated? Why might an investor choose a bond that’s not highly rated? 15 ?Discuss these questions with your classmates or with a partner.Brainstorm 2-3 companies you think it would be a GOOD idea to invest in.Brainstorm 2-3 companies you think it would be a BAD idea to invest in.How did you decide which category to put the companies in?16 ?Stocks Vs. BondsIn the previous lesson, you learned about bonds. ?In this, we’ll focus on a higher risk investment: ?stocks. ?Watch this video which compares bonds and stocks. What are some ways that ?smart investors use stocks? ?17Dow vs. S&P Since 1957Recall from earlier lessons that the Dow and S&P are both stock indices -- bundles of stocks that can be used to represent the health of the entire stock market. ?You can skip the text. ?Review the graph on this page -- the red line shows the the historical performance of the Dow Jones Industrial Average (30 stocks) and the light gray line shows the S&P 500 Index (500 stocks). ?Use the data to answer the questions at right. What is being measured in the graph?In 1957, what was the approximate value for the Dow? For the S&P 500? ? ?In 2001, what was the approximate value for the Dow? For the S&P 500? ?If the two indexes are composed of different stocks, why do you think their values are so similar?How would you summarize the performance of the two indices before 2000, compared to after 2000? What conclusions can you draw from that?Do these graphs support the previous video’s view on investing in the stock market? Why or why not?18 How to Calculate Rate of ReturnInvestors like to track the progress of their investment using a metric called “rate of return.” ?Watch this video to learn how rate of return is calculated. ?What does rate of return represent? ?What would it mean if your rate of return were negative? ?In what way is rate of return on a stock similar to interest rate on a savings account? ?19Index Funds vs. Actively Managed Mutual FundsAfter watching this video, featuring two “experts” with two very different opinions, which do you think makes a more convincing argument? ?Why do you feel like his or her advice is better?20 ?Choosing a BrokerIf you’re going to invest in the stock market, you’ll need a broker. Read this brief description of the 4 different levels of stockbroker. For each level, write a one-sentence profile for a hypothetical person who would use this type of stockbroker. ?When you begin investing, which type of broker do you think you will choose? ?Discount/online brokerDiscount broker with assistanceFull service brokerMoney managerWhen you begin investing, which type of broker do you think you will choose? ?21 ?Broker Closes the SaleIf you seek advice from a stock broker, you should understand that all of their interests may not be perfectly aligned with yours. Watch this extreme example from the movie Boiler Room. What questions might you ask a potential broker to see if your goals are aligned? How will you know if you can trust your broker? 22How to Start an Online Broker AccountNow that you’ve learned a little bit about the different types of investments (individual stocks, index funds, mutual funds) you can choose in order to invest in the stock market, read this article on setting up an online broker account. ?Start reading at the heading “What is a Discount Online…”As an investing novice, what are 3 key features of online brokerages you would want to compare before selecting the one that’s right for you? ................
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