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Stock Project Instructions

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Stock Project Instructions

  1. 1. Stock Project • First of all, what is a “stock”?
  2. 2. Stock Project • First of all, what is a “stock”? – The Economics textbook defines stock as “a certificate of ownership in a corporation.” Stock is part ownership of a company.
  3. 3. Stock Project • First of all, what is a “stock”? – The Economics textbook defines stock as “a certificate of ownership in a corporation.” Stock is part ownership of a company. – Not all companies are publicly owned, and therefore, not all companies sell shares of stock.
  4. 4. Stock Project • First of all, what is a “stock”? – The Economics textbook defines stock as “a certificate of ownership in a corporation.” Stock is part ownership of a company. – Not all companies are publicly owned, and therefore, not all companies sell shares of stock. – So, what’s the difference between a publicly owned corporation and a privately owned business?
  5. 5. Private Owned Business vs.Public Corporation • Anyone in America is free to start and operate a business, whether it is a sole proprietorship, a partnership, or a corporation.
  6. 6. Private Owned Business vs.Public Corporation • Anyone in America is free to start and operate a business, whether it is a sole proprietorship, a partnership, or a corporation. • An individual may own a business (sole proprietorship), or join resources with a business associate (partnership).
  7. 7. Private Owned Business vs.Public Corporation • Anyone in America is free to start and operate a business, whether it is a sole proprietorship, a partnership, or a corporation. • An individual may own a business (sole proprietorship), or join resources with a business associate (partnership). • A group of individuals may form a corporation. It may be either private owned, or public owned.
  8. 8. Private Owned Business vs.Public Corporation • Anyone in America is free to start and operate a business, whether it is a sole proprietorship, a partnership, or a corporation. • An individual may own a business (sole proprietorship), or join resources with a business associate (partnership). • A group of individuals may form a corporation. It may be either private owned, or public owned. • If it is publicly owned, then individuals may purchase stock in the company. Each share of stock is part ownership in the corporation.
  9. 9. Stock Ownership • If a corporation issues 1,000 shares of stock, and you purchase 1 share, then you own 1/1000th of the company.
  10. 10. Stock Ownership • If a corporation issues 1,000 shares of stock, and you purchase 1 share, then you own 1/1000th of the company. • Why do companies issue shares of stock for sale to the public?
  11. 11. Stock Ownership • If a corporation issues 1,000 shares of stock, and you purchase 1 share, then you own 1/1000th of the company. • Why do companies issue shares of stock for sale to the public? – By selling shares of stock, companies raise the funds (capital) necessary to operate a business.
  12. 12. Why sell shares of corporate stock?• Imagine you invented a machine, and have good reason to believe that if you could mass produce it, then you could earn a profit selling it.
  13. 13. Why sell shares of corporate stock?• Imagine you invented a machine, and have good reason to believe that if you could mass produce it, then you could earn a profit selling it.• Problem: you do not have the funds necessary to purchase a factory, machines, or hire workers to mass produce your invention.
  14. 14. Why sell shares of corporate stock?• Imagine you invented a machine, and have good reason to believe that if you could mass produce it, then you could earn a profit selling it.• Problem: you do not have the funds necessary to purchase a factory, machines, or hire workers to mass produce your invention.• Solution: you form a corporation, sell shares of stock and raise the needed funds to begin mass production.
  15. 15. Why sell shares of corporate stock?• Imagine you invented a machine, and have good reason to believe that if you could mass produce it, then you could earn a profit selling it.• Problem: you do not have the funds necessary to purchase a factory, machines, or hire workers to mass produce your invention.• Solution: you form a corporation, sell shares of stock and raise the needed funds to begin mass production.• If you can prove to investors that your company may earn them a profit, then you may be able to acquire the capital necessary to turn your idea into reality.
  16. 16. Stock Investment – Profit or Loss • Obviously, you do not know for sure that you will earn a profit. In other words, you are taking a business risk. You are, therefore, an entrepreneur.
  17. 17. Stock Investment – Profit or Loss • Obviously, you do not know for sure that you will earn a profit. In other words, you are taking a business risk. You are, therefore, an entrepreneur. • If your company makes profit, then shareholders of your company’s stock will also earn profit.
  18. 18. Stock Investment – Profit or Loss • Obviously, you do not know for sure that you will earn a profit. In other words, you are taking a business risk. You are, therefore, an entrepreneur. • If your company makes profit, then shareholders of your company’s stock will also earn profit. • If your company loses money, then shareholders of your company’s stock will share the company’s loss.
  19. 19. Stock Investment – Profit or Loss • Obviously, you do not know for sure that you will earn a profit. In other words, you are taking a business risk. You are, therefore, an entrepreneur. • If your company makes profit, then shareholders of your company’s stock will also earn profit. • If your company loses money, then shareholders of your company’s stock will share the company’s loss. • That is the risk involved in stock investment. There are potential benefits to stock investment, and there are inherent risks.
  20. 20. Stock Investment – Profit or Loss • Obviously, you do not know for sure that you will earn a profit. In other words, you are taking a business risk. You are, therefore, an entrepreneur. • If your company makes profit, then shareholders of your company’s stock will also earn profit. • If your company loses money, then shareholders of your company’s stock will share the company’s loss. • That is the risk involved in stock investment. There are potential benefits to stock investment, and there are inherent risks. • So, how does one make wise stock investments?
  21. 21. Stock Investment – Profit or Loss • Obviously, you do not know for sure that you will earn a profit. In other words, you are taking a business risk. You are, therefore, an entrepreneur. • If your company makes profit, then shareholders of your company’s stock will also earn profit. • If your company loses money, then shareholders of your company’s stock will share the company’s loss. • That is the risk involved in stock investment. There are potential benefits to stock investment, and there are inherent risks. • So, how does one make wise stock investments? • Do your homework: research before investing.
  22. 22. Researching Stock • There are many ways to research a company.
  23. 23. Researching Stock • There are many ways to research a company. • For our example, we will look at Yahoo.com’s Finance website http://finance.yahoo.com/ to research the Apple Corporation.
  24. 24. 1. Type the name of the company you are researching in this box. Typing in “Apple” yields many results including Apple, Inc. If we go to Apple’s finance page….
  25. 25. 1. We can see: -how much Apple stock is selling for in real time.
  26. 26. 1. We can see: -how much Apple stock is selling for in real time. -the company’s stock symbol (AAPL)
  27. 27. 1. We can see: -how much Apple stock is selling for in real time. -the company’s stock symbol (AAPL), as well as the stock exchange on which it is traded (NASDAQ – the 2nd largest stock exchange in the world after the NYSE – New York Stock Exchange).
  28. 28. 1. We can see: -how much Apple stock is selling for in real time. -the company’s stock symbol (AAPL), as well as the stock exchange on which it is traded (NASDAQ – the 2nd largest stock exchange in the world after the NYSE – New York Stock Exchange). -how much the price of one share of AAPL stock has risen or fallen today (as indicated by the downward pointing arrow and the amount $1.36).
  29. 29. 3. Yahoo Finance includesgraphs showing the stock’s valueover time. In this case, it showsthe stock’s price fluctuation todayon the stock exchange. You mayalso click on any of the timeranges below the chart to observeits performance over days (1d,5d), months (3m, 6m) or years(1y, 2y, 5y).
  30. 30. 4. You can read more about whatthe company produces and someof its business history by clickingon the company “profile.” Thatkind of information is verysignificant when determiningwhether or not to invest one’smoney in a company’s stock.
  31. 31. Stock Project – Now What? • Research different companies. Pick 5 to follow over the next 10 business days.
  32. 32. Stock Project – Now What? • Research different companies. Pick 5 to follow over the next 10 business days. • Determine how many shares of each stock you will “purchase” using a hypothetical $1,000.
  33. 33. Stock Project – Now What? • Research different companies. Pick 5 to follow over the next 10 business days. • Determine how many shares of each stock you will “purchase” using a hypothetical $1,000. – This requires juggling the numbers until you figure out how many shares of each stock you can afford without going over the $1,000 mark. Get as close to $1,000 as possible in the original total investment amount between the five different stocks.
  34. 34. Original Prices Example # of Shares Original # of # of Shares x Final PriceName of Stock Price per x Original per Share Share Shares Final Price  PriceGoogle 593.02 1 593.02Kraft Foods 38.38 5 191.90Sony 19.16 2 38.32Nike 103.31 1 103.31AT&T 29.98 2 59.96 Original Total Final Total 986.51 Investment Investment
  35. 35. Original Prices Example # of Shares Original # of # of Shares x Final PriceName of Stock Price per x Original per Share Share Shares Final Price  Price This example shows the original investment in 5 stocks. NoticeGoogle 593.02 1 593.02 most expensive stock – the Google – sells for $593.02 per share. The student could onlyKraft Foods 38.38 5 191.90 afford 1 share of Google stock. However, Kraft Foods stock was selling for only $38.38 per share,Sony 19.16 2 38.32so the student was able to purchase more shares of that stock.Nike 103.31 1 103.31 Once you have determined which stocks – and how many shares ofAT&T 29.98 2 59.96each – to purchase, you will follow the progress of those stocks for the next 10 business days. Original Total Final Total 986.51 Investment Investment
  36. 36. It only takes a few minutes at thebeginning of class each day torecord the closing price of eachstock you are following. Look forthe “Prev Close” (that’s the pricethe stock was being sold at whenthe stock market closed theprevious business day).Be sure to record the price for eachof your stocks on each of the 10business days. You will use that information tocreate a chart tracking each stock’sprogress.
  37. 37. Completing the Assignment • In the end, you will create a chart showing the price fluctuation for each stock over those 10 business days. It may be easiest to create a separate chart for each stock.
  38. 38. Completing the Assignment • In the end, you will create a chart showing the price fluctuation for each stock over those 10 business days. It may be easiest to create a separate chart for each stock. • Your chart(s) may be hand drawn, or you may use Microsoft Excel to create it.
  39. 39. Completing the Assignment • In the end, you will create a chart showing the price fluctuation for each stock over those 10 business days. It may be easiest to create a separate chart for each stock. • Your chart(s) may be hand drawn, or you may use Microsoft Excel to create it. • On the 10th business day, complete the last two columns of the chart on the assignment sheet by recording the Final Price per Share, and then calculate the Final Total Investment.
  40. 40. Completing the Assignment • In the end, you will create a chart showing the price fluctuation for each stock over those 10 business days. It may be easiest to create a separate chart for each stock. • Your chart(s) may be hand drawn, or you may use Microsoft Excel to create it. • On the 10th business day, complete the last two columns of the chart on the assignment sheet by recording the Final Price per Share, and then calculate the Final Total Investment. • Calculate the difference between the original investment and the final investment. Indicate whether the difference was a profit or a loss.
  41. 41. Final Prices Example # of Shares Original # of # of Shares x Final PriceName of Stock Price per x Original per Share Share Shares Final Price  PriceGoogle 593.02 1 593.02 596.45 596.45Kraft Foods 38.38 5 191.90 34.15 170.75Sony 19.16 2 38.32 20.74 41.48Nike 103.31 1 103.31 100.26 100.26AT&T 29.98 2 59.96 35.06 70.12 Original Total Final Total 986.51 979.06 Investment Investment
  42. 42. Original Prices Example # of Shares Original # of # of Shares x Final PriceName of Stock Price per x Original per Share Share Shares Final Price  PriceGoogle In this case, the 593.02 1 593.02 596.45 596.45 student originally invested $986.51Kraft Foods 38.38 5 191.90 34.15 170.75Sony 19.16 2 38.32 20.74 41.48Nike 103.31 1 103.31 100.26 100.26AT&T 29.98 2 59.96 35.06 70.12 Original Total Final Total 986.51 979.06 Investment Investment
  43. 43. Original Prices Example # of Shares Original # of # of Shares x Final PriceName of Stock Price per x Original per Share Share Shares Final Price  PriceGoogle In this case, the 593.02 1 593.02 596.45 596.45 student originally invested $986.51, and by the 10thKraft Foods 38.38 5 191.90 34.15 170.75 business day theSony investment had 19.16 2 38.32 20.74 41.48 dropped to $979.06.Nike 103.31 1 103.31 100.26 100.26AT&T 29.98 2 59.96 35.06 70.12 Original Total Final Total 986.51 979.06 Investment Investment
  44. 44. Original Prices Example # of Shares Original # of # of Shares x Final PriceName of Stock Price per x Original per Share Share Shares Final Price  PriceGoogle In this case, the 593.02 1 593.02 596.45 596.45 student originally invested $986.51, and by the 10thKraft Foods 38.38 5 191.90 34.15 170.75 business day theSony investment had 19.16 2 38.32 20.74 41.48 dropped to $979.06. Thus theNike student lost $7.45 103.31 1 103.31 100.26 100.26 by the 10th businessAT&T day. 29.98 2 59.96 35.06 70.12 Original Total Final Total 986.51 979.06 Investment Investment

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