Chapter

1. Chapter Securities Markets: Financing and Investing Opportunities 19 19-1

2. Capital Markets • Primary Markets (IPO's) • Secondary Markets

3. Bull Market Bear Market Stock Market Fluctuations

4. Stock Exchanges Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

5. Stock Exchanges • Organization whose members can buy and sell (exchange) securities for companies and investors • Brokerage firms purchase memberships (seats) on the exchanges Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

6. Organized Securities Exchanges • New York Stock Exchange (NYSE) • American Stock Exchange (AMEX) • NASDAQ • Foreign Stock Exchanges

7. Foreign Exchanges • Japan ----------- NIKKEI • Germany ------- DAX • France ---------- CAC-40 • Britain ---------- FTSE 100 • Euro Zone ----- DJ Euro Stoxx • Hong Kong ---- Hang Seng • India ------------- Bombay Sensex Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

8. BONDS(Debt)

9. Bond Terms • Principal • Interest Rate • Term • Issue Date • Maturity Date

10. Bond Classes • Classes • Unsecured • Debenture • Secured • Mortgage

11. Special Bond Features • Sinking Fund • Callable • Convertible

12. STOCKS(Equity)

13. What is Stock? • Ownership • Dividends • Common and Preferred

14. Issuing Common Stock • Most basic form of ownership and includes the rights: • To vote for company’s board of directors and on important issues • To share in the company’s profits through dividends • Preemptive rights give common stockholders first right to purchase any new shares of common stock Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

15. Issuing Preferred Stock • Stock that gives its owners preference in payment of dividends and earlier claim on assets • Does not include voting rights • May be called a hybrid investment (stock/bond) Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

16. Issuing Preferred Stock Preferred stocks and Bonds are rated according to Risk by Standard & Poor’s and Moody’s Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

17. Issuing Preferred Stock • Special Features of Preferred Stock: • Preferred stock can be callable • Preferred stock can be convertible • With cumulative preferred stock missed dividends can be accumulated if not paid Source: St. Louis-Dispatch, “How to Sniff Out Investing Scams”, Feb. 17, 2002.

18. Features of Stock • Market Order • Limit Order

19. Stock Splits

20. How Stock Splits Work 100 shares of ABC stock selling @ $99 3 for 1Stock Split Declared 100 shares $33@ 100 shares $33@ 100 shares $33@ Lower Price increases Demand Increased demand increases price 100 shares @$37 100 shares @$37 100 shares @$37 How Much Potential Profit Has Been Made?

21. Buying Stock On Margin

22. Buying Stock on MarginHow does the investor make money? The investor finds he is able to buy the stock with a 40% margin An investor wishes to buy 100 shares at $100 per share Step 1 Step 3 The investor puts up $4,000 and borrows $6,000 from the broker However, the investor has only $4,000 available to invest Step 4 Step 2

23. Stock Market Indicators • Dow Jones Industrial Average (DJIA) • 30 Industrial, 20 Transportation, 15 Utility • Standard & Poor’s 500 • 400 Industrial, 40 Financial, 40 Utility, 20 Transportation • NASDAQ • Big Charts.com