Basics and History of Stock Market

Question 1

What is stock?

Answer 1

an instrument that signifies an ownership position (called equity) in a corporation, and represents a proportional share in the corporation’s assets and profits.

Question 2

Why is it called stock?

Answer 2

This term was used by early Dutch investors when they invested money into ships from the Dutch East India Co. as they were trading around the world.

Question 3

What does investing in a company mean?

Answer 3

It means that you now own stock in the company.

Question 4

What are shares?

Answer 4

Units of stock are called “shares” which entitles the owner to a proportion of the corporation’s assets and profits equal to how much stock they own. Shares are basically units of ownership.

Question 5

Why do companies sell stock?

Answer 5

1. to invest in research
2. hire more people
3. create new products
4. upgrade buildings
5. improve existing products and services
6. reduce debt

Question 6

What is the stock market?

Answer 6

The Stock Market is a measure of the value of different companies’ stocks and it is a direct reflection of the value of the company.

Question 7

When prices of stock rise…

Answer 7

their value increases

Question 8

When prices of stock fall…

Answer 8

their value decreases

Question 9

The value of stocks is often in what state?

Answer 9

fluctuating state

Question 10

The stock market serves as what?

Answer 10

an economic indicator - a strong market reveals a strong economy; when the market “tanks”, people begin to worry about the state of the economy

Question 11

What can influence the stock market?

Answer 11

external events

Question 12

What is an exchange?

Answer 12

An Exchange can be a physical location like the NYSE in New York City, NY or it can also be entirely online such as the NASDAQ (also located in New York City)

Question 13

Exchanges brings together whom?

Answer 13

Buyers and sellers of stock

Question 14

3 Key points of an exchange:

Answer 14

1. You have to qualify to be sold on the exchange.
2. The buyer and seller must agree on a price before the purchase.
3. Exchanges are filled with thousands of different companies

Question 15

Oldest existing stock certificate is from what?

Answer 15

1606 from a Dutch company involved in the spice industry

Question 16

Most stock business revolved around _____ and _____.

Answer 16

Shipping and spice trades

Question 17

Seat of economic commerce became whom?

Answer 17

London – idea of trading stocks came to U.S. with colonists

Question 18

Who was Alexander Hamilton?

Answer 18

1st U.S. treasurer

Question 19

What did Alexander Hamilton believe?

Answer 19

believed stock trade was essential to building and maintaining a strong economy

Question 20

What was the first publicly owned company?

Answer 20

The Dutch East India Company in 1606

Question 21

Who were the biggest shipping and trade nations?

Answer 21

Dutch, British, French

Question 22

Dutch, British and French were the biggest shipping and trade nations during what years?

Answer 22

1500s and 1600s

Question 23

The kings and queens of these countries allowed merchants to do what?

Answer 23

sell goods and buy from other countries (mainly the east indies)

Question 24

These shipping company owners had lots of money at stake. The voyages to the Indies were dangerous for three major reasons:

Answer 24

1. weather
2. pirates
3. poor navigation

Question 25

The boat owners needed a way to reduce the risk so they began to ask for investors to help fund the voyages. What did they get in return?

Answer 25

the investors would be given a portion of the proceeds if the trip went well.

Question 26

The New York Stock Exchange was strongly encouraged by?

Answer 26

Treasury Secretary Alexander Hamilton

Question 27

Hamilton encouraged people to do what?

Answer 27

exchange stock in NYC on the corner of Broad and Wall Streets

Question 28

What happened in 1817?

Answer 28

traders organized the New York Stock Exchange at 40 Wall St.

Question 29

When did the stock market crash take place?

Answer 29

Tuesday, Oct. 29, 1929

Question 30

What happened during the stock market crash?

Answer 30

The Dow Jones Industrial Average had been at an all-time high, but it was becoming clear that the market was going to contract. There was a rush to sell stocks – the ticker machines and phone lines were jamming, which furthered chaos and the desire to sell

Question 31

Who found themselves deeply in debt because the stock market crash?

Answer 31

Stock owners who had bought “on margin”

Question 32

Why does the stock market exsit?

Answer 32

1. Allows stock holders to track their investments 2. Allows prospective stock buys to make informed decisions about different companies 3. Provides a physical “place” for stock to be exchanged (on the “trading floor”) - done via the internet now

Question 33

What does the stock market provide?

Answer 33

Provides a realistic value of stocks in various companies.

Question 34

Measures of Stock Strength: Dow v NASDAQ

Answer 34

Dow Jones Industrial Average: An index that shows how 30 large, publicly owned companies have traded during a standard trading session on the stock market. Most of the 30 companies no longer have anything to do with heavy industry. National Association of Securities Dealers Automated Quotations: Has 2,872 listings = 2nd largest trading market in the world. Highest trading volume globally

Question 35

What are the benefits of the stock market?

Answer 35

1. Instant availability 2. Little possibility of being caught in default 3. Safeguards in place to protect investors from fraud(by the Securities and Exchange Commission) 4. Opportunity to own part of a major corporation 5. Opportunity for economic gain

Question 36

What are the risks involved in the stock market?

Answer 36

1. Ignorance – haven’t studied the market trends or corporation 2. There is a high level of risk involved – there is no guarantee of investment return 3. Particularly when people invest in “start-up” companies – could strike it rich, could lose entire investment 4. “Dotcom” Bubble Bursting 5. Fees for buying or trading stock

Question 37

What are the top five markets in trillions?

Answer 37

1. NYSE - $9.57 2. Tokyo - $ 3.10 3. NASDAQ – $2.77 4. Euronext (Paris)- $2.26 5. London S.E. - $2.20

Question 38

Why should people care?

Answer 38

1. RELATES TO EVERYONE’S LIFE 2. RELATES TO U.S. STRENGTH 3. INFLUENCES ECONOMY 4. INFLUENCES YOUR WALLET