Introduction to StocksIntroduction to Stocks
A share of stock is a share of a business. Many people
try to gain more money by investing their money in
stocks. People who own stock are called stockholders.
They are then a partial owner of the company that issues
the stock and may share in a company’s profits, if the
company makes a profit during the year. This is paid in
the form of dividends. The company’s board of directors
distributes the dividends proportionately by the number
of shares outstanding.
Common stock is always issued by the corporation. It
represents an ownership interest in the company.
People owning common stock usually have the right to
vote for the directors of the company. Preferred stock
may also be issued by the corporation. This kind of
stock is given certain preferential treatment over
common stock. These stockholders may receive fixed
dividends before the common stockholders are paid,
along with other advantages. However, they generally
have no voting privileges and cannot expect to receive
more than their fixed dividend.
The prices of stock change often. Most active stocks change in
value during a day’s trading. A corporation only has a certain
number of shares available to buy. The laws of supply and
demand cause the prices to fluctuate. Prices depend on general
business conditions, company earnings, and what people think
is the future prospect of the corporation. When more people
want to buy, the market in stocks will rise. When more people
want to sell, prices go down. The trick is to try and guess
correctly; buy when the price is low, sell when the price is as
high as it is going to go.
Stockbrokers (or "brokers") are the people whose job it is
to buy and sell stocks for the buyer. They also can give
advice about which stocks might be good investments.
The buyer pays the broker a small commission, or fee for
services, each time stocks are bought and sold.
An excellent list of stock terms can be found on the net
at the USA Today web page. Look under the heading
A stock exchange is the market place where brokers
buy and sell stocks. The NYSE (New York Stock
Exchange), AMEX (American Stock Exchange), and
NASDAQ (National Association of Securities Dealers)
are the three main U. S. stock exchanges. The current
prices of many stocks are available on the net, along
with a lot of other stock market information. Two
sources are listed on the home page "hot points." See
the "Reading and Understanding Stocks" section below
on how to read the stock listings.
Reading and UnderstandingReading and Understanding
the Stocksthe Stocks
Current stock listings on the net are organized a
little differently from source to source, but they all
have the same basic information.
First you have to type in the correct SFN, the
abbreviation for the name of the company. If you
don’t know what the abbreviation is, you can find
it by looking in the "Search for Symbol" section
on the USA Today web page. There are many
other sources, too.
Once you have entered the correct SFN, you will
see the information you need.
Last - The most recent trade of a stock.
Change - This shows the change in price from the
previous day’s closing price.
Currency - This shows the currency that is used, such as
USD for U. S. dollar.
% Change - This calculates the percentage change in the
price of a stock from the previous day's closing price.
Open - The price at which a stock opens the trading day.
Day Low - This is the lowest price that a stock has traded
at during the day.
Day High - This is the highest price that a stock has traded
at during the day.
Volume - This is the daily number of shares of a stock that
changes hands between a buyer and a seller. Some sources
give these listings in hundreds or thousands.
Dividend - The annual per share cash payout investors
P.E. - The Price-to-EarningsP.E. - The Price-to-Earnings
The ratio of the market price per share to
the earnings per share.
The you should practice reading real stock
information. You will look at a company's
listing and ask them to figure out the
answers to questions like these:
1. What was the highest price paid per share that
2. What was the lowest price paid that day?
3. What was the closing price paid that day? (This
might not be available because the web carries the
latest information, and the market can still be open
4. Now figure the net change. This is the
difference in price from the last price paid per
share on the previous day. It can be positive or
I want all students use a newspaper, too.
Stock quotations on the net are available in
fractional form and . If you want to, you can
have your students practice converting
prices from their fractional form, as they are
listed in the newspaper, to a decimal to the
nearest thousandth. For example 12 3/8
means 12 3/8 dollars. Change the 3/8 by
dividing 3 by 8. The result is 0.375, so 12
3/8 = 12.375
Stock Market PracticeStock Market Practice
1. Jessica earned $5.00 an hour baby-sitting. In an entire year that
turned out to be 410 hours. How many shares of Disney stock,
that is selling for 83 5/8 dollars per share, could she buy with that
money? Don't include transaction costs at this time.
$5.00 x 410 = $2050 to spend
The price of one share is $83 5/8, or $83.625
$2050 divided by $83.625 = 24.5142003
Jessica cannot buy part of a share of stock, so she drops the decimal portion
of the number. She can buy 24 shares of the stock.
Now find out how many shares Jessica could have
purchased if the Cost per share is:
5 ¼ 16 1/8 31 7/8 22 ½ 75 5/16
2. Pat earned $3170 during the summer. How many shares could
he buy of a stock that is selling for 29 3/8 per share? This time
include the broker's commission of 3%.
Change the commission of 3% to 0.03 and multiply by 3170
3170 x 0.03 =$95.10 That is the broker's commission, which should be
subtracted from the amount to be invested.
$3170 - $95.10 = $3074.90
The price of one share is 29 3/8, or $29.375
Divide the amount he has left after the commission by the price per share:
$3074.90 Ö $29.375 = 104.6774468
Again, the decimal portion of the number must be dropped because he
cannot buy part of a share of stock. He can buy 104 shares of stock.
Now find out how many shares could be purchased if Pat
had $3170 with a 3% broker's commission, and:
Cost per share is:
5 ¼ 16 1/8 31 7/8 22 ½ 75 5/16
3. Jason bought 36 shares of stock at 43 3/8, or $43.3125, per
share. He didn't have to pay a commission fee. What was the
total amount that Jason invested, to the nearest cent?
Multiply and then round off to the nearest cent
36 x $43.31 = $1559.16
Jason invested $1559.16
Now find out the total amount invested (to the nearest cent)
4. Henry bought 40 shares of stock at 32 7/8, or $32.875, per
share. He paid a commission of $39.45. What was the total
amount that Henry invested, to the nearest cent?
Multiply to find the cost of the shares, and round to the nearest
$32.875 x 40 = $1315.00
Then add the commission
$1315.00 + $39.45 = $1354.45
Henry invested $1354.45 in all.
Now find out the total amount invested, to theNow find out the total amount invested, to the
nearest cent, when:nearest cent, when:
Cost per Share: Commision Paid:
25 $46.50 $37.20
60 $16.45 $28.62
100 $9.375 $25.15
85 $49.125 $118.27
200 $37.75 $206.50
55. Georgia sold her 30 shares of Nike stock five months. Georgia sold her 30 shares of Nike stock five months
after she bought them. The sale price was $82 5/8 perafter she bought them. The sale price was $82 5/8 per
share. She paid a commission of $74.36. What was theshare. She paid a commission of $74.36. What was the
profit or loss on the $2416.77 that Georgia invested?profit or loss on the $2416.77 that Georgia invested?
Multiply the price per share by 30 to find the total price of
$82.625 x 32 = $2478.75
Now subtract the amount of the commission
$2478.75 - $74.36 = $2404.39
Since the amount received was more than the amount
invested, there was a gain. Subtract to find the gain.
$2416.77 - $2404.39 = $12.38
Georgia had a gain of $12.38 on her investment.
Now find the amount of profit or loss when:Now find the amount of profit or loss when:
$75.00 100 $10.375 $31.13
$1254.75 30 $42.125 $31.60
$1500.00 70 $22.50 $47.25
$3328.00 200 $17.75 $88.75
$1950.86 50 $39.875 $59.81
Now you are ready for the
IV. Stock Market ProjectIV. Stock Market Project
This project is for students who are already familiar with
the stock market. They can use their understanding in an
This can be done individually, in pairs, or in small groups.
Each group starts with $20,000 (or amount of your choice)
to purchase stock. You are to surf the net for stock advice.
Stock selections can have other certain criteria of your
choice. For example, one from a:
– Clothes / shoes company
– Food / restaurant
– one each from the NYSE, AMEX, and NASDAQ.
– one picked randomly
You should calculate a 3% commission each time they buy
or sell stocks.
You will then collect their data using the net and other
sources. You will make your stock selections and purchase
stock. You then calculate their beginning portfolio value.
(See directions below). At designated intervals, they
should assess their portfolios. You will show your progress
to the rest if the class using charts, graphs, and oral
At the end of the project, you prepare a written report
summarizing how you did and what you learned. It may
even include what you would like to do with the imaginary
money earned, or what you would have to do without, in
the case of losses.
You need "Buy/Sell Forms" to purchase and sell stocks.
Here is an example of what a Buy/Sell Form could look
Buy / Sell FormBuy / Sell Form
Price of the
Price of Shares
3% Commission + -
You will also need a "Stock Form" to record the price,You will also need a "Stock Form" to record the price,
change, and value of that stock. Here is an example ofchange, and value of that stock. Here is an example of
a Stock Form:a Stock Form:
As a group keep track of their holdings on a "PortfolioAs a group keep track of their holdings on a "Portfolio
Form." Example:Form." Example:
Date Stock Value
You will use plenty of math when they are trying to spend
their $20,000 on stocks. You should discover that you need
to have a system for figuring out and keeping track of your
purchases. Hopefully you will come up with an organized
list that will look something like this:
Stock Price Number of