Unit 14 stocks bonds mergers monopoly


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Unit 14 stocks bonds mergers monopoly

  1. 1. Stocks, Bonds, Monopoly, Merger
  2. 2. <ul><li>Stocks represent shares of a company. These shares give part of the ownership of the company to you, the share-holder. Your stake in that company is defined by the amount of shares that you, the investor, own. </li></ul>
  3. 3. <ul><li>Bonds are loans to a company, corporation or the government. You purchase the bond and that institution gives you a receipt (bond) for your loan with a promise to repay you with interest over a period of time in the future. Bonds are bought and sold on the open market </li></ul>
  4. 4. <ul><li>Common stock is ownership in a company…stocks traded on the open market. </li></ul><ul><li>Those who own these stocks earn a dividend from their share of the company profits. Some companies such as Microsoft don't pay dividends, and never have any intentions of doing so. </li></ul><ul><li>The obvious risk with common stock is that the price may fall and you risk losing what you have invested. A good thing about common stock is that you can not lose more than your initial investment. </li></ul>
  5. 5. <ul><li>Preferred Stock sold by companies and is then traded among investors on the secondary market. Preferred stock is less risky than common stock, therefore investors can expect less reward. </li></ul><ul><li>Like Bonds (which give interest payments to the owner), preferred stocks give regular dividends for a period of time. There is no hope for making big money (large capital gains) but these are also less risky than common </li></ul>
  6. 6. <ul><li>A Merger is a combination of two or more companies into one. </li></ul><ul><li>Mergers threaten competition so the government tries to limit them. </li></ul>
  7. 7. <ul><li>Vertical Mergers (AKA Vertical Integration)—This is when firms at different stages in the production chain merge (such as Oil companies) </li></ul><ul><li>Horizontal Mergers (AKA Horizontal Integration)- where competing firms in the same industry merge (Sprint merges with AT&T) </li></ul>
  8. 8. <ul><li>Monopoly- --when a market is controlled by a sole provider of a good or service and there is no competition </li></ul><ul><li>Competition is maintained by the government by controlling monopolies. </li></ul><ul><li>Congress has tried to control monopolies and their powers by creating anti-trust laws. These laws are put in to ban monopolies and keep industries competitive. </li></ul><ul><li>Two examples of anti-trust laws: the Sherman Antitrust Act and the Clayton Act. </li></ul><ul><li>  </li></ul>
  9. 9. <ul><li>A type of monopoly that exist because there are high fixed costs in a particular industry is known as a Natural Monopoly . Because it is economically sensible to have certain natural monopolies, governments often regulate those in operation, ensuring that consumers get a fair deal. </li></ul><ul><li>Examples of natural monopolies include the telephone companies, water companies, and gas companies. </li></ul>