Economics: The Stock Market

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Christian principles that should be considered when studying the stock market...

1. Stewardship (Prov. 13:11 & Matt. 25:27) be a good steward of your money 2. Covetousness (Deut. 5:21 & I Tim. 6:9) Success is not defined by material things 3. Love for God (Matt. 6:24, 33 & Matt. 22:37) Put God first. You can't serve 2 masters. 4. Love for Others (Matt. 22:39) Love your neighbor as yourself. DOn't take advantage of them.

When and why was the SEC founded?

1934; to ensure that corporations provide accurate & current information to the public about their financial situation & their business dealings

The DJIA is an index of...

30 major U.S. producers of goods & services

Stock Portfolio

A collection of stocks from different individual corporations

Standard & Poor's 500 (S&P 500)

A commonly reported investment index that includes 500 stocks & is intended to give an even broader perspective on business in the U.S. than the DJIA

Dividends

A distribution of a portion of the corporation's profits

Bear Market

A falling stock market in which investors are selling stock

Securities & Exchange (SEC)

A governmental agency funded to ensure that coroporations provide accurate & current information to the public about their financial situations & their business dealings. Founded in 1934, a safeguard

Mutual Funds

A group of stocks purchased by individuals & managed by a professional. Privately managed stock portfolios

Stock Exchanges

A location at which stock is traded

Stockbroker

A person who generally works for a brokerage company & who specializes in buying & selling stocks on behalf of his clients

Bull Market

A rising stock market in which investors are buying stock

Portfolio

A set of investment assets owned by an individual

Speculation

Actively buying & selling stocks for the purpose of taking advantage of short-term price changes. Risky, close to gambling

Tape

An electronic message board used to indicate stock prices & transactions

Speculative Bubble

Excessive rising stock prices due to expected rises in prices. When the stock value exceeds the company's worth.

What is the most prevalent type of stock that corporations offer?

Common stock

A dividend payment is based on the...

Company's profits

Which is the most well-known stock index?

DJIA

What is the most well-known stock index in the U.S., & who developed it? What well-known business publication did they start?

Dow Jones Industrial Average (DJIA), Charles Dow & Edward Jones, The Wall Street Journal

The organization that helps a business issue stock to the public for the first time is...

Investment bank

What is the danger of speculation?

It is a high risk to lose investments

Common Stock

Most prevalent type of stock that companies offer & represent true ownership of the firm

What is the largest stock exchange in the U.S. that has no trading floor?

NASDAQ

Which stock exchange is entirely electronic with no face-to-face trading?

NASDAQ

The most respected stock exchange in the world is the..

NYSE

The index that includes all the stocks on the NYSE is the

NYSE Composite Index

Preferred Stock

Not true ownership of a corporation. Stock that carries less risk of loss

What is the most well-known stock exchange in the world, & what accounts for its importance

New York Stock Exchange (NYSE), Its history, location in the financial center of N.Y., & listings, which include many of the most economically significant companies in the world

Businesses sell stock to the public primarily to...

Obtain additional financial capital

List 3 reasons that stock markets are important to the economy.

Provide a venue for the sale of stock, provide opportunities for individuals to invest, & provide information to corporate leaders, economic analysts, & governmental policy makers (valuable info on a nation's economy)

What are the two principle reasons that individuals purchase shares of stocks?

Retirement & dividends

Actively buying & selling stocks for the purpose of profiting from short-term changes in their prices is called...

Specualtion

What term describes a group of stocks that are listed together with their prices combined & reported together?

Stock Index

Floor Traders

Stock traders physically present on the trading floor to execute requested trades

What is a person called who works for an investment firm & specializes in the buying & selling of stocks? What does he receive that can be either a flat rate or a percentage of the value of the stock trade?

Stockbroker, commission

NASDAQ

The National Association of Securities Dealers Automated Quotations, the largest exchange that does not have a trading floor

The price of a stock tends to reflect information and expectations about...

The company's profitability

Commission

The fee paid for a stockbroker's services

Initial Public Offering (IPO)

The initial sale of a company's stock through an investment bank

American Stock Exchange (Amex)

The lesser known but still reputable American stock market

New York Stock Exchange (NYSE)

The most well-known & reputable stock market in the world. It is the center of America's financial center

Dow Jones Industrial Average (DJIA)

The most well-known American stock index

What does over-the-counter trading lack that other stock exchanges have?

There's no physical location where trading takes place

Owning shares of stock not only makes a person a partial owner of a corporation, but also gives that person what other opportunity?

To cast votes on business decisions & to earn dividends

What is the SEC's principal function?

To supervise the industries

Why do corporations sell stock?

To take advantage of the limited liability & legal status they gain by organizing their business as a corporation & to raise money for business purposes, expansion, & research

Stock

When you own shares of a corporation


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