Why do individuals buy stock in corporations?.Who sets the price of a share of stock?.What is the process of selling stock to the public called?.Show Slide 6 and use the speaking notes to guide you. Ask the class, “How can individual investors earn money in the stock market?” Answer by saying, “There are basically 3 ways: buying stock at a low price and selling it at a higher price, by earning dividends (share of profits from the company), and by short selling (see mini lesson on short selling below). Prices may fall because shareholders want to get rid of their stocks due to bad news, such as a liability lawsuit or lack of demand. For example, stock buyers may offer higher prices if the company is earning high profits, if it secures a patent on a new product, or because the economy is doing well and more investors are buying stock. The stock price may rise or fall for a variety of reasons. Most people buy and sell existing shares of stock in the secondary market instead of directly from the company. Explain that the share is only worth whatever someone is willing to pay for it. The student will likely say whatever dollar figure they paid for it.Ask the volunteer the following questions: Exchange the paper stock certificate for money from one of the volunteers. Offer to sell the stock in exchange for classroom play money. The owners want to expand, so they are having an IPO. Announce that ABC is a firm that sells popular new board games. Then, hold up one share of ABC Corporation common stock. Ask for 4-6 volunteers, and give each volunteer a small handful of classroom money. Pre-cut the Stock and Bond Cards as well as the Money Cards. They buy a piece of ownership in the company.
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