Standard 2 - Personal and financial goals can be achieved by applying economic concepts and principles to personal financial planning, budgeting, spending, saving, investing,borrowing, and insuring decisions.

Benchmark - 9.2.2.2.2 -Evaluate investment options using ctiteria such as risk, return, liquidity and time horizon; evaluate and apply risk management strategies in investing and insuring decisions.

Lesson Plan: The Stock Market: Risks & Rewards

Activity 1: How to Read Stock Market 

Many newspapers publish daily reports of stock market transactions. Collect 3-5 days of a single newspaper, like the Wall Street Journal, choose a few stocks, and follow their activity. The terms on this worksheet will help you understand the abbreviations, words, and phrases you may find in the newspaper's stock market listing. Not all newspapers include as much detail as the terms defined below.

YTD % CHG stands for year-to-date percentage of change. In other words, how much has the stock risen or fallen compared to where it was a year ago on today's date?

52-Wk High shows the highest selling price of the stock in the last 52 weeks.

52-Wk Low shows the lowest selling price of the stock in the last 52 weeks.

Stock column gives the full name of the company.

Sym is the symbol used by the company on the ticker reports generated by the stock exchanges that track the trading of each stock.

Yield shows -

• The dividend amount column shows the current cash amount that will be paid over one year to the owner of one share of stock. Some companies pay very little or no dividends.
• The percentage yield is the amount of dividends received per share of stock compared to the price of a share of the stock. The yield is calculated by dividing the dividend per share of stock by the last (closing) price and then multiplying by 100 to obtain a percentage.
• PE (price/earnings) ratio: the price of a share of stock divided by the company's earnings (profits) per share for the last 12-month period. Some investors use this ratio to gauge the relative value of a stock in light of current market conditions. To find the ratio, you divide the market price by earnings per-share. (Earnings per-share is the amount of new profit produced by each share of outstanding common stock.) Owning stock in a company gives stockholders a claim to part of the firm's future profits. Clearly, therefore, the price of the stock compared to current profits per-share is an important ratio for investors to consider.

Volume lists the number of shares sold (in hundreds).

Last shows the stock's price at close of business yesterday.

NET CHG shows how the price has risen or fallen compared to yesterday's closing price.

Choose some stocks that you know about (Burger King, Intel, the Gap, etc.) and see what you can discover about them as you track them over 3-5 days. Here are some questions to get you started:

Chosen Stocks

1. ____________________________
2. ____________________________
3. ____________________________
4. ____________________________
5. ____________________________

Answer these questions In submissions.

1. How many shares are traded each day?
2. What's the closing price on the first day? The second day? The third day? What can you say about the stock based on its performance?
3. Is the closing price on these days closer to the high or the low for the year?
4. Of the stocks you've chosen, which pays the highest dividend?
5. Of the stock you've chosen, which is the most stable?
6. What does the P/E ratio indicate about each stock?

Now go to an Internet source, like www.bigcharts.com, to see how you can get information formatted somewhat differently than the newspapers.

_{Concepts based on information from Focus: High School Economics. © National Council on Economic Education, New York, NY, 1997.}