Stocks & Reading a Stock TableName ______
Period ____ Date ______
A.Primary Definitions
1. Ownership of a Business. A business may be owned …
[a] Sole Proprietorship – business is owned & managed by ______
[b] Partnership – business is owned & managed by ______individuals
[c] Corporation – business is owned by ______
2. A stock is ______in a corporation. It entitles the stockholder to receive a share of the profits of the corporation or bear some of the losses of the corporation. From the table above ..
Corporation Name: ______Stock Symbol: ______Exchange: ______
Current Share Price $ ______52-Week Range $ ______
3. An investor earns money on stocks in 2 ways:
[a] when she buys the stock at a ______price and sells it at a ______price, and
[b] when the corporation pays dividends to its stockholders
dividend -- payment of ______for each share of a stock; the reported dividend is
always an annual amount paid; many companies do not pay dividends.
4. P/E: price-earnings ratio – divide the price by the stock’s earnings per share
Which is better? You pay $10 for a stock that earns you $10? $10 ⁄ $10 = ____
You pay $50 for a stock that earns you $10? $50 ⁄ $10 = ____
So a ( higher lower ) P/E ratio is better.
** Careful – only compare P/E ratios among companies in the same industry **
5. EPS: Earnings Per Share - profit / each outstanding share; it’s a measure of profitability
Which is better?$100 profit in a company with 25 shares?$100 ⁄ 25 = ____
$100 profit in a company with 100 shares?$100 ⁄ 100 = ____
So a ( higher / lower ) EPS is better.
B.Additional Terms .... In case you’re curious
Vol:trading volume – how many shares of a company’s stock were traded on that day.
Yield: amount of dividends received per share of stock as compared to the price of that share. Percentage Yield = Dividend ⁄ closing price x 100 to get a percentage
Shares: issued stock; number of shares of stock that have been sold & are held by shareholders.
C.Buying Stocks “On Margin”
6. You ______money from a broker in order to buy more shares. You must eventually ______this money back to the broker. Ideally, the price of the stock rises and when you sell the shares, the proceeds from the sale are enough to ______the money borrowed plus give your team a ______.
7. Of course, nothing is free! Costs of buying on margin:
[1] the Federal Reserve requires that you meet the “margin requirement” – you (the investor) must put up a percentage of the ______price. In our Stock Market Game the margin requirement is ____%
[2] Not only do you pay a brokerage fee for every trade you make, you must also pay ____% ______on the money you borrow from the broker.
8.Angie is interested in investing in Coca-Cola. Her team wants to buy 100 shares on margin at $50/share. The margin requirement is 50%. To complete this transaction, Angie must put up $______of her team’s money and borrow $______from their broker. Angie later sells all 100 shares of Coke stock at $62/share. Did she gain or lose? How much?
D.“Short Selling” Stocks
9. Short selling is a strategy to implement when you believe the
price of a particular stock will ______.
10. To short sell, you ______shares of stock that you don’t own from your broker. You then ______those borrowed shares immediately, adding the proceeds from the sale to your team’s cash position. You must eventually ______these shares back from the broker. Ideally, the price of the stock drops and when you buy the shares back, you buy them back for ______than you sold them thus making a gain for your team. This is called “covering your short position.”
11. Nick short sells 100 shares of stock in Disney corporation at $65/per share. He later short covers for $70/share. Did Nick gain or lose? How much?
Stocks & Reading a Stock TableTEACHER’S COPY
A.Primary Definitions
1. Ownership of a Business. A business may be owned …
[a] Sole Proprietorship – business is owned & managed by one individual
[b] Partnership – business is owned & managed by two or more individuals
[c] Corporation – business is owned by stockholders
2. A stock is part ownership in a corporation. It entitles the stockholder to receive a share of the profits of the corporation or bear some of the losses of the corporation. From the table above ..
Corporation Name: ______Stock Symbol: ______Exchange: ______
Current Share Price $ ______52-Week Range $ ______
3. An investor earns money on stocks in 2 ways:
[a] when she buys the stock at a low price and sells it at a higher price, and
[b] when the corporation pays dividends to its stockholders
dividend -- payment of profit for each share of a stock; the reported dividend is always
an annual amount paid; many companies do not pay dividends.
4. P/E: price-earnings ratio – divide the price by the stock’s earnings per share
Which is better? You pay $10 for a stock that earns you $10? $10 ⁄ $10 = ____
You pay $50 for a stock that earns you $10? $50 ⁄ $10 = ____
So a ( higher lower ) P/E ratio is better.
** Careful – only compare P/E ratios among companies in the same industry **
5. EPS: Earnings Per Share - profit / each outstanding share; it’s a measure of profitability
Which is better?$100 profit in a company with 25 shares?$100 ⁄ 25 = ____
$100 profit in a company with 100 shares?$100 ⁄ 100 = ____
So a ( higher / lower ) EPS is better.
B.Additional Terms .... In case you’re curious
Vol:trading volume – how many shares of a company’s stock were traded on that day.
Yield: amount of dividends received per share of stock as compared to the price of that share. Percentage Yield = Dividend ⁄ closing price x 100 to get a percentage
Shares: issued stock; number of shares of stock that have been sold & are held by shareholders.
C.Buying Stocks “On Margin”
1. You _borrow__ money from a broker in order to buy more shares. You must eventually _repay_ this money back to the broker. Ideally, the price of the stock rises and when you sell the shares, the proceeds from the sale are enough to _repay_ the money borrowed plus give your team a _gain_.
2. Of course, nothing is free! Costs of buying on margin:
[1] the Federal Reserve requires that you meet the “margin requirement” – you (the investor) must put up a percentage of the _purchase_ price. In our Stock Market Game the margin requirement is ____%
[2] Not only do you pay a brokerage fee for every trade you make, you must also pay _7_% _interest_on the money you borrow from the broker.
3.Angie is interested in investing in Coca-Cola. Her team wants to buy 100 shares on margin at $50/share. The margin requirement is 50%. To complete this transaction, Angie must put up $_2,500_ of her team’s money and borrow $_2,500_ from their broker. Angie later sells all 100 shares of Coke stock at $62/share. Did she gain or lose? How much?
Angie gained $1,150
D.“Short Selling” Stocks
1. Short selling is a strategy to implement when you believe the
price of a particular stock will _drop_.
2. To short sell, you _borrow_ shares of stock that you don’t own from your broker. You then _sell_ those borrowed shares immediately, adding the proceeds from the sale to your team’s cash position. You must eventually _buy back_ these shares back from the broker. Ideally, the price of the stock drops and when you buy the shares back, you buy them back for _less_ than you sold them thus making a gain for your team. This is called “covering your short position.”
3. Nick short sells 100 shares of stock in Disney corporation at $65/per share. He later short covers for $70/share. Did Nick gain or lose? How much? Nick lost $550
Teacher’s CopyTeacher’s Copy