The stock markets have been headline news items recently, as a record-high share values have been hit hard by a cyclical downturn in business activity and by specific adverse influences including the bursting of the dot com bubble, the events of September 11, and the business accounting issues highlighted by the Enron bankruptcy case. When we read about businesses filing for bankruptcy or people having lost their retirement funds, we may think it is an appropriate time to question why anybody invests in the stock market. Historically, the stock market has been a symbol of the economic strength of the U.S. economy. The largest stock exchange in the U.S. is the New York Stock Exchange or NYSE. More than 2,500 companies list their stock on the NYSE. Generally people invest in stocks in order to provide for their retirement; however, some people try to "get rich quick" through the market. In order to invest wisely in the stock market it is essential to do background research and to follow certain investment practices. A basic starting point has to do with understanding the language of the markets.
In this lesson you will gain knowledge of the terms associated with the stock market, read and understand an internet stock display, and apply your knowledge of stock terms by making decisions completing a stock project.
You will first want to download this Worksheet.
You will use the following definitions to fill in Part 1 of the worksheet. Roll the mouse over each term on the chart to find its definition.
You will go to following link and research stock information to complete Part 2 of the worksheet. Then you will return to the following websites for ten consecutive days to monitor stocks.
MSN Money Central
A site that provides stock information. To access information about the required stock on the worksheet, you will have to type the symbol of the stock into the light blue box in the upper right side of the screen labeled "get quote."
You must answer all questions correctly to return to the lesson.
What is the largest stock exchange in the U.S.?
- AMEX Exchange
- NASDAQ Exchange
- New York Exchange
Chicago Board of Trade
A high PE ratio indicates
- That the stock is cheap to invest in at this point in time
- That the stock is expensive to invest in at this point in time
- The amount of profit a company is making
The amount of interest paid on the stock
Which of the following should be considered when investing in the stock market?
- 52 week hi/low
- PE ratio
- All the above
None of the above
The portion of a profit that is paid to a stock owner is the
- PE ratio
Which of the following indicates the percent interest the individual stock is paying?
- PE ratio
Based on all of the information you have collected on General Electric and Maytag, which stock would you invest in today? Why?
How does a dividend affect a stock's yield?
As an investor, do you want a stock to have a high or low PE ratio?
Understanding the terms associated with the stock market are important to making educated decisions about investment. If students were to truly invest in the stock market, they would need to look at stock performance over a longer period of time. This would help them to get a good look at how the stock has performed over six months, a year, or five years. Once students have an understanding of the stock terms they are ready to move on to the project.
Using one of the following web sites:
- MSN Money Central
- CBS Market Watch
- NASDAQ quotes
- New York Stock Exchange - use the Quick Quote option
Choose one stock you might wish to invest in. Once you've chosen a stock, you must prepare a short paper/presentation explaining why you decided on that stock. The paper/presentation should include the following information:
- The name of the stock and some background on the company. What does it produce? How long has it been around? How many offices does the company have? Is it an International company? Where are the company's offices?
- Details on the stock. What is it currently trading at? What has it done over the past year?
- At least two recent news items. Is the company releasing any new products? Is it merging with anyone else?
- Explain why you would or wouldn't invest in this stock. Use specific data to back up your decision. In your explanation, use terms such as the P/E, news items, historical figures, etc.