l earning, e arning, and i nvesting for a n ew g eneration © c ouncil for e conomic e ducation, n...

LEARNING, EARNING, AND INVESTING FOR A NEW GENERATION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

THE LANGUAGE OFFINANCIAL MARKETS

LESSON 20


The Language of Financial Markets: TermsStocks, Bonds, and Mutual Funds• Bond• Common Stock• Initial Public Offering (IPO)• Index Fund• Mutual Fund• Preferred Stock

Technical Terms• Capital Gain• Dividend• Growth Stock• Income Stock• Liquidity• Risk• Return• Stock Spill

Buying and Selling in the Market• Buying on Margin• Commission• Ponzi Scheme• Price• Short Selling

Exchanges and Indexes• Dow Jones Industrial Average (DJIA)• NASDAQ Stock Market• New York Stock Exchange (NYSE)• Over-the-Counter Market• S&P 500 Stock Index

People in Financial Markets• Broker• Dealer• Institutional Investor• Investment Bank• Stockholder

LESSON 20 – THE LANGUAGE OF FINANCIAL MARKETS

SLIDE 20.1


The Language of Financial Markets: Quiz Bowl Score Sheet

Group Score

1

2

3

4

5


SLIDE 20.2


The Language of Financial Markets: Quiz Bowl Game Board


Invest in This

Potent Investme

nts

Index or Exchange

Earn ItWho Am

I?

Financial Markets

Potpourri

10 10 10 10 10 10

20 20 20 20 20 20

30 30 30 30 30 30

40 40 40 40 40 40

50 50 50 50 50 50

SLIDE 20.3


Invest in This:


A debt investment in which an investor lends money to an entity (corporate or

governmental) that borrows the money for a defined period of time at an agreed interest

rate.

Click to Check

SLIDE 20.4


Bond

10


The correct answer is…

Return to Game Board

SLIDE 20.5


Invest in This:


An ownership share or shares of ownership in

a corporation.

Click to Check

SLIDE 20.6


Common Stock

20




SLIDE 20.7


Invest in This:


A company that pools money from investors and uses it to buy stocks or bonds on the

investors’ behalf.

Click to Check

SLIDE 20.8


Mutual Fund

30




SLIDE 20.9


Invest in This:


The stock of a firm that is expected to do well – to have above-average increases in revenues and earnings. These stocks often

pay no dividend, but the stockholder gains if the price of the stock increases.

Click to Check

SLIDE 20.10


Growth Stock

40




SLIDE 20.11


Invest in This:


An ownership share in a corporation with a guaranteed dividend that is paid before any

dividends are paid on common stock.

Click to Check

SLIDE 20.12


Preferred Stock

50




SLIDE 20.13


Potent Investments:


Buying stock by paying only a percentage of the purchase price (typically 50 percent) and

borrowing the balance from a broker.

Click to Check

SLIDE 20.14


Buying on Margin

10




SLIDE 20.15


Potent Investments:


A mutual fund whose objective is to match the composite investment performance of a large group of stocks or bonds such as those represented by the Standard & Poor’s 500.

Click to Check

SLIDE 20.16


Index Fund

20



SLIDE 20.17



Potent Investments:


An investment fraud that holds no real assets, paying off existing investors by using

funds from new investors.

Click to Check

SLIDE 20.18


Ponzi Scheme

30



SLIDE 20.19



Potent Investments:


The chance of losing money on an investment.

Click to Check

SLIDE 20.20


Risk

40



SLIDE 20.21



Potent Investments:


A stock transaction that allows an investor to make money on a stock expected to fall

in value. This transaction involves the immediate sale of shares not owned by the seller, who expects to buy them back later

at a lower price.

Click to Check

SLIDE 20.22


Short Selling

50



SLIDE 20.23



Index or Exchange:


The acronym stands for American Stock Exchange, formerly an independent market

but now part of the New York Stock Exchange.

Click to Check

SLIDE 20.24


AMEX

10



SLIDE 20.25



Index or Exchange:


The most commonly quoted measure of stock-market performance. The averages it

reports are calculated by reference to 30 large, well-

known firms.

Click to Check

SLIDE 20.26


Dow Jones Industrial Average

20



SLIDE 20.27



Index or Exchange:


Founded in 1971, this stock market is the world’s largest in terms of trading volume

and is the home to many technology stocks including Apple, eBay, Intel, and Yahoo!

Click to Check

SLIDE 20.28


NASDAQ Stock Market

30



SLIDE 20.29



Index or Exchange:


The oldest stock exchange in the United States, founded in 1792. Merged in 2007

with the European stock exchange Euronext.

Click to Check

SLIDE 20.30


New York Stock Exchange

40



SLIDE 20.31



Index or Exchange:


The acronym stands for the Standard and Poor’s 500 Stock Index. The index includes

500 large and varied stocks.

Click to Check

SLIDE 20.32


S&P 500

50



SLIDE 20.33



Earn It:


A profit realized from the sale of property, stocks, or other investments.

Click to Check

SLIDE 20.34


Capital Gain

10



SLIDE 20.35



Earn It:


A percentage of a stock trade (a buy or sell) paid by a customer to a stockbroker.

Click to Check

SLIDE 20.36


Commission

20



SLIDE 20.37



Earn It:


A share of a company’s profits paid toshareholders.

Click to Check

SLIDE 20.38


Dividend

30



SLIDE 20.39



Earn It:


The market value of anything being offered for sale.

Click to Check

SLIDE 20.40


Price

40



SLIDE 20.41



Earn It:


Money earned from an investment. The money could be profits, interest,

appreciation, or a combination of these.

Click to Check

SLIDE 20.42


Return

50



SLIDE 20.43



Who Am I?


A professional trader who buys and sells stocks for individuals and institutional

customers.

Click to Check

SLIDE 20.44


Broker

10



SLIDE 20.45



Who Am I?


Someone who buys and sells stocks from his or her own accounts or the accounts of the

firm he or she represents.

Click to Check

SLIDE 20.46


Dealer

20



SLIDE 20.47



Who Am I?


An organization (an insurance company or pension fund, for example) that invests in

the stock market for clients.

Click to Check

SLIDE 20.48


Institutional Investor

30



SLIDE 20.49



Who Am I?


An institution that participates in the primary markets for the sale of newly issued

stocks and corporate and government bonds.

Click to Check

SLIDE 20.50


Investment Bank

40



SLIDE 20.51



Who Am I?


A person who owns stock; sometimes called a shareholder.

Click to Check

SLIDE 20.52



Stockholder


50

SLIDE 20.53



Financial Markets Potpourri:


A stock that pays dividends regularly.

Click to Check

SLIDE 20.54



Income Stock


10

SLIDE 20.55





The first sale of stock by a private company to the public.

Click to Check

SLIDE 20.56


Initial Public Offering


20


SLIDE 20.57





The ease with which savings or investments can be turned into cash.

Click to Check

SLIDE 20.58



Liquidity


30

SLIDE 20.59





A network of securities dealers connected by a computer network to buy and sell stock

without a centralized trading floor.

Click to Check

SLIDE 20.60



Over-the-Counter Market


40

SLIDE 20.61





The division of a firm’s outstanding shares of stock into a higher number of shares. The purpose is to lower the price of the stock to

attract more buyers.

Click to Check

SLIDE 20.62



Stock split


50

SLIDE 20.63


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